Organisation for Economic Co-operation and Development

TAD/PG(2023)7
Unclassified

English - Or. English
17 July 2023

TRADE AND AGRICULTURE DIRECTORATEPARTICIPANTS TO THE ARRANGEMENT ON OFFICIALLY SUPPORTEDEXPORT CREDITSARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
July 2023

This version of the Arrangement on Officially Supported Export Credits replaces the January2022 version [TAD/PG(2022)1]. This revision of the Arrangement includes all modifications
agreed to the Arrangement, including its Annexes, and is effective as of 15 July 2023.

Xcred Secretariat, Export Credits and Competition Division, Trade and Agriculture
Directorate, OECD
Tel.: +33 (0)1 45 24 89 10; e-mail: export-credits@oecd.org

JT03523421
OFDE

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory,
to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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Table of contents
CHAPTER I: GENERAL PROVISIONS .............................................................................................. 6
1.
2.
3.
4.
5.
6.
7.
8.
9.

PURPOSE..................................................................................................................................... 6
STATUS ....................................................................................................................................... 6
PARTICIPATION ........................................................................................................................ 6
INFORMATION AVAILABLE TO NON-PARTICIPANTS ..................................................... 6
SCOPE OF APPLICATION......................................................................................................... 6
PROHIBITIONS ON ARRANGEMENT SUPPORT .................................................................. 7
SECTOR UNDERSTANDINGS.................................................................................................. 8
WITHDRAWAL .......................................................................................................................... 8
MONITORING ............................................................................................................................ 8

CHAPTER II: FINANCIAL TERMS AND CONDITIONS FOR EXPORT CREDITS ................... 8
10.
CLASSIFICATION OF COUNTRIES FOR LOCAL COSTS SUPPORT ........................ 911.
DOWN PAYMENT, MAXIMUM OFFICIAL SUPPORT AND LOCAL COSTS ........... 9
12.
MAXIMUM REPAYMENT TERMS ............................................................................... 10
13.
REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST ............................... 10
14.
INTEREST RATES, PREMIUM RATES AND OTHER FEES ...................................... 11
15.
VALIDITY PERIOD FOR EXPORT CREDITS .............................................................. 1116.
ACTION TO AVOID OR MINIMISE LOSSES .............................................................. 1117.
MATCHING...................................................................................................................... 1118.
MINIMUM FIXED INTEREST RATES UNDER OFFICIAL FINANCINGSUPPORT .......................................................................................................................................... 12
19.
CONSTRUCTION AND APPLICATION OF CIRRs...................................................... 12
20.
PREMIUM FOR CREDIT RISK ...................................................................................... 1221.
MINIMUM PREMIUM RATES FOR CREDIT RISK..................................................... 1222.
COUNTRY RISK CLASSIFICATION ............................................................................ 15
23.
SOVEREIGN RISK ASSESSMENT ................................................................................ 1624.
BUYER RISK CLASSIFICATION .................................................................................. 1725.
PERCENTAGE AND QUALITY OF OFFICIAL EXPORT CREDIT COVER ............. 18
26.
COUNTRY RISK MITIGATION TECHNIQUES ........................................................... 1827.
BUYER RISK CREDIT ENHANCEMENTS .................................................................. 18
28.
VALIDITY OF THE MINIMUM PREMIUM RATES FOR CREDIT RISK .................. 19
CHAPTER III: PROVISIONS FOR TIED AID ................................................................................. 19
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.

GENERAL PRINCIPLES ................................................................................................. 19
FORMS OF TIED AID ..................................................................................................... 20
ASSOCIATED FINANCING ........................................................................................... 20
COUNTRY ELIGIBILITY FOR TIED AID .................................................................... 21
PROJECT ELIGIBILITY .................................................................................................. 21
MINIMUM CONCESSIONALITY LEVEL .................................................................... 22
EXEMPTIONS FROM COUNTRY OR PROJECT ELIGIBILITY FOR TIED AID ..... 22
CALCULATION OF CONCESSIONALITY LEVEL OF TIED AID ............................. 23
VALIDITY PERIOD FOR TIED AID .............................................................................. 24
MATCHING...................................................................................................................... 24

CHAPTER IV: PROCEDURES .......................................................................................................... 25
SECTION 1: COMMON PROCEDURES FOR EXPORT CREDITS AND TRADE-RELATED AID 25

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39.
NOTIFICATIONS ............................................................................................................. 25
40.
INFORMATION ON OFFICIAL SUPPORT ................................................................... 25
41.
PROCEDURES FOR MATCHING .................................................................................. 25
42.
SPECIAL CONSULTATIONS ......................................................................................... 26
SECTION 2: PROCEDURES FOR EXPORT CREDITS ................................................................... 26
43.
PRIOR NOTIFICATION WITH DISCUSSION .............................................................. 26
44.
PRIOR NOTIFICATION .................................................................................................. 27
SECTION 3: PROCEDURES FOR TRADE-RELATED AID ............................................................ 2845.
PRIOR NOTIFICATION .................................................................................................. 28
46.
PROMPT NOTIFICATION .............................................................................................. 28
SECTION 4: CONSULTATION PROCEDURES FOR TIED AID .................................................... 29
47.
PURPOSE OF CONSULTATIONS ................................................................................. 29
48.
SCOPE AND TIMING OF CONSULTATIONS ............................................................. 29
49.
OUTCOME OF CONSULTATIONS ............................................................................... 29
SECTION 5: INFORMATION EXCHANGE FOR EXPORT CREDITS AND TRADE-RELATED
AID ..................................................................................................................................................... 30
50.
CONTACT POINTS ......................................................................................................... 30
51.
SCOPE OF ENQUIRIES .................................................................................................. 30
52.
SCOPE OF RESPONSES ................................................................................................. 30
53.
FACE-TO-FACE CONSULTATIONS ............................................................................. 30
54.
PROCEDURES AND FORMAT OF COMMON LINES ................................................ 31
55.
RESPONSES TO COMMON LINE PROPOSALS ......................................................... 31
56.
ACCEPTANCE OF COMMON LINES ........................................................................... 31
57.
DISAGREEMENT ON COMMON LINES...................................................................... 32
58.
EFFECTIVE DATE OF COMMON LINE ....................................................................... 32
59.
VALIDITY OF COMMON LINES .................................................................................. 32
SECTION 6: REVIEWS ..................................................................................................................... 33
60.
REGULAR REVIEW OF THE ARRANGEMENT ......................................................... 33
61.
REVIEW OF MINIMUM INTEREST RATES ................................................................ 33
62.
REVIEW OF MINIMUM PREMIUM RATES AND RELATED ISSUES ..................... 33
63.
REVIEW OF OFFICIAL SUPPORT FOR LOCAL COSTS............................................ 33
64.
REVIEW OF REPAYMENT PROFILES AND TERMS ................................................. 33
ANNEX I: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CLIMATECHANGE ............................................................................................................................................. 35
ANNEX II: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR
POWER PLANTS ............................................................................................................................... 53
ANNEX III: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL
AIRCRAFT .......................................................................................................................................... 56
PART 1: GENERAL PROVISIONS .................................................................................................... 56
1.
2.
3.
4.
5.
6.
7.

PURPOSE................................................................................................................................... 56
STATUS ..................................................................................................................................... 56
PARTICIPATION ...................................................................................................................... 56
SCOPE OF APPLICATION....................................................................................................... 57
INFORMATION AVAILABLE TO NON-PARTICIPANTS ................................................... 57
AID SUPPORT........................................................................................................................... 57
ACTIONS TO AVOID OR MINIMISE LOSSES ..................................................................... 57

PART 2: NEW AIRCRAFT ................................................................................................................. 58
CHAPTER I: COVERAGE................................................................................................................ 58

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8.

NEW AIRCRAFT ...................................................................................................................... 58

CHAPTER II: FINANCIAL TERMS AND CONDITIONS ........................................................... 58
9. ELIGIBLE CURRENCIES ........................................................................................................ 58
10.
DOWN PAYMENT AND MAXIMUM OFFICIAL SUPPORT ...................................... 58
11.
MINIMUM PREMIUM RATES ....................................................................................... 59
12.
MAXIMUM REPAYMENT TERM ................................................................................. 59
13.
REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST ............................... 59
14.
MINIMUM INTEREST RATES....................................................................................... 60
15.
INTEREST RATE SUPPORT .......................................................................................... 60
16.
FEES .................................................................................................................................. 60
17.
CO-FINANCING .............................................................................................................. 61
PART 3: USED AIRCRAFT, SPARE ENGINES, SPARE PARTS, MAINTENANCE ANDSERVICE CONTRACTS ..................................................................................................................... 61
CHAPTER I: COVERAGE................................................................................................................ 61
18.

USED AIRCRAFT AND OTHER GOODS AND SERVICES ........................................ 61

CHAPTER II: FINANCIAL TERMS AND CONDITIONS ........................................................... 61
19.
20.
21.
22.
23.

SALE OF USED AIRCRAFT ........................................................................................... 61
SPARE ENGINES AND SPARE PARTS ........................................................................ 62
CONTRACTS FOR CONVERSION/MAJOR MODIFICATION/REFURBISHING ..... 62
MAINTENANCE AND SERVICE CONTRACTS .......................................................... 63
ENGINE KITS .................................................................................................................. 63

PART 4: TRANSPARENCY PROCEDURES ..................................................................................... 63
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.

INFORMATION ON OFFICIAL SUPPORT ................................................................... 63
REQUESTS FOR INFORMATION ................................................................................. 63
FACE-TO-FACE CONSULTATIONS ............................................................................. 64
SPECIAL CONSULTATIONS ......................................................................................... 64
PROCEDURES AND FORMAT OF COMMON LINES ................................................ 64
RESPONSES TO COMMON LINE PROPOSALS ......................................................... 65
ACCEPTANCE OF COMMON LINES ........................................................................... 65
DISAGREEMENT ON COMMON LINES...................................................................... 65
EFFECTIVE DATE OF COMMON LINE ....................................................................... 65
VALIDITY OF COMMON LINES .................................................................................. 65
MATCHING...................................................................................................................... 66

PART 5: MONITORING AND REVIEW ........................................................................................... 66
35.
36.
37.

MONITORING ................................................................................................................. 66
REVIEW............................................................................................................................ 66
FUTURE WORK .............................................................................................................. 67

PART 6: FINAL PROVISIONS .......................................................................................................... 67
38.
39.

ENTRY INTO FORCE ..................................................................................................... 67
WITHDRAWAL ............................................................................................................... 67

APPENDIX I PARTICIPATION IN THE AIRCRAFT SECTOR UNDERSTANDING ........... 68
APPENDIX II MINIMUM PREMIUM RATES ............................................................................. 69
ANNEX 1: QUALIFYING DECLARATIONS ................................................................................ 80
ANNEX 2: CAPE TOWN CONVENTION QUESTIONNAIRE .................................................... 82
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APPENDIX III MINIMUM INTEREST RATES ........................................................................... 84
APPENDIX IV REPORTING FORM.............................................................................................. 88
APPENDIX V LIST OF DEFINITIONS ......................................................................................... 90
ANNEX IV: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS ................... 93
ANNEX V: INFORMATION TO BE PROVIDED FOR NOTIFICATIONS ............................. 110
ANNEX VI: CALCULATION OF THE MINIMUM PREMIUM RATES FOR COUNTRYRISK CATEGORY 1-7 TRANSACTIONS .................................................................................... 116
ANNEX VII: PREMIUM BENCHMARKS FOR
MARKET BENCHMARK TRANSACTIONS............................................................................... 119
ANNEX VIII: CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF A
THIRD-PARTY REPAYMENT GUARANTEE AND THE CRITERIA FOR ASSESSING
MULTILATERAL OR REGIONAL INSTITUTIONS ................................................................. 120
ANNEX IX: BUYER RISK CATEGORIES QUALITATIVE DESCRIPTIONS ...................... 122
ANNEX X: CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF
COUNTRY RISK MITIGATION TECHNIQUES AND BUYER RISK CREDIT
ENHANCEMENTS ........................................................................................................................... 127
ANNEX XI: CHECKLIST OF DEVELOPMENTAL QUALITY ............................................... 131
ANNEX XII: COMMERCIAL INTEREST REFERENCE RATE (CIRR) PROVISIONS ...... 133
ANNEX XIII: LIST OF DEFINITIONS ......................................................................................... 136

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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CHAPTER I: GENERAL PROVISIONS1.

PURPOSEa) The main purpose of the Arrangement on Officially Supported Export Credits, referred tothroughout this document as the Arrangement, is to provide a framework for the orderly use of
officially supported export credits.
b) The Arrangement seeks to foster a level playing field for official support, as defined in
Article 5 a), in order to encourage competition among exporters based on quality and price ofgoods and services exported rather than on the most favourable officially supported financial
terms and conditions.

2.

STATUS

The Arrangement, developed within the OECD framework, initially came into effect in April 1978 and isof indefinite duration. The Arrangement is a Gentlemen’s Agreement among the Participants; it is not anOECD Act1, although it receives the administrative support of the OECD Secretariat (hereafter: “theSecretariat”).

3.

PARTICIPATIONThe Participants to the Arrangement currently are: Australia, Canada, the European Union, Japan, Korea,
New Zealand, Norway, Switzerland, Türkiye, the United Kingdom and the United States. Other OECD
Members and non-members may be invited to become Participants by the current Participants.

4.

INFORMATION AVAILABLE TO NON-PARTICIPANTSa) The Participants undertake to share information with non-Participants on notifications related
to official support as set out in Article 5 a).
b) A Participant shall, on the basis of reciprocity, reply to a request from a non-Participant in acompetitive situation on the financial terms and conditions offered for its official support, as it
would reply to a request from a Participant.

5.

SCOPE OF APPLICATIONThe Arrangement shall apply to all official support provided by or on behalf of a government for exportof goods and/or services, including financial leases, which have a repayment term of two years or more.
a) Official support may be provided in different forms:
1) Export credit guarantee or insurance (pure cover).
2) Official financing support:
1

As defined in Article 5 of the OECD Convention.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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TAD/PG(2023)7  7‒ direct credit/financing and refinancing, or‒ interest rate support.
3) Any combination of the above.
b) The Arrangement shall apply to tied aid; the procedures set out in Chapter IV shall also apply
to trade-related untied aid.
c) The Arrangement does not apply to exports of military equipment and agricultural commodities.
d) Official support shall not be provided if there is clear evidence that the contract has been
structured with a purchaser in a country which is not the final destination of the goods, primarily
with the aim of obtaining more favourable repayment terms.

6.

PROHIBITIONS ON ARRANGEMENT SUPPORT

Participants shall not provide officially supported export credits or tied aid for:a) The export of new coal-fired electricity generation plants or parts thereof, comprising allcomponents, equipment, materials and services (including the training of personnel) directly
required for the construction and commissioning of such power stations. The addition of a newcoal-fired electricity generation unit to an existing plant is deemed to be a new coal-fired
electricity generation plant.
b) The export supply of equipment to existing coal-fired electricity generation plants, unless all thefollowing conditions are met:i.

The purpose of the equipment supplied is air pollution abatement, water pollution
abatement, or CO2 emissions abatement.

ii.

The equipment supplied induces neither an extension of the useful lifetime of the plant nor
a capacity increase.

c) The prohibitions set out in paragraphs a) and b) above do not apply to coal-fired electricity
generation plants that operate with effective carbon capture utilisation and storage (CCUS)
facilities or the retrofitting of existing coal-fired electricity generation plants to install CCUS, as
provided for under Project Class B, Type 1 of Appendix I to Annex I.
d) Participants agree to undertake a review, upon request by a Participant, of non-CCUS CO2emission abatement technologies which may be developed in the future, for purposes of
exceptions from paragraphs a) and b) above. The inclusion of any future exception shall bebased on a consensus decision by the Participants.
e) The provisions set out in paragraphs a) through d) above shall be reviewed no later than
31 December 2022, in order to contribute to the common goal of addressing climate change,
taking into account:i.

The most recent reports on climate science and the implications for global infrastructure
investment decisions of holding the increase in the global average temperature to well
below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit thetemperature increase to 1.5 degrees Celsius above pre-industrial levels;

ii.

Officially supported export credits or tied aid support to other coal related projects;

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7.

iii.

Availability of CCUS technology; andiv.

Availability of non-CCUS CO2 abatement technologies.

SECTOR UNDERSTANDINGSa) The following Sector Understandings are part of the Arrangement:‒ Climate Change (Annex I)‒ Nuclear Power Plants (Annex II)‒ Civil Aircraft (Annex III)‒ Ships (Annex IV)b) A Participant to either Annex I, II, or IV may apply the respective provisions for official support
for export of goods and/or services covered by the relevant Sector Understandings. For Annex I
or II, where the Sector Understanding does not include a corresponding provision to that of the
Arrangement, a Participant to that Sector Understanding shall apply the provision of the
Arrangement.
c) For the export of goods and/or services covered by Annex III, the Participants that are also
Participants to that Sector Understanding shall apply the provisions of that Sector
Understanding.

8.

WITHDRAWAL

A Participant may withdraw by notifying the Secretariat in writing by means of instant communication,e.g. using the electronic mail system that is maintained by the Secretariat to facilitate communications
amongst Participants and the Secretariat. The withdrawal takes effect 180 calendar days after receipt of
the notification by the Secretariat.

9.

MONITORINGThe Secretariat shall monitor the implementation of the Arrangement.

CHAPTER II: FINANCIAL TERMS AND CONDITIONS FOREXPORT CREDITS

Financial terms and conditions for export credits encompass all the provisions set out in this Chapter
which shall be read in conjunction one with the other. The Arrangement sets out limitations on terms andconditions that may be officially supported. The Participants recognise that more restrictive financial
terms and conditions than those provided for by the Arrangement traditionally apply to certain trade orindustrial sectors. The Participants shall continue to respect such customary financial terms andconditions, in particular the principle by which repayment terms do not exceed the useful life of the goods
and services.

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10.

CLASSIFICATION OF COUNTRIES FOR LOCAL COSTS SUPPORTa) Category I countries are High Income2 OECD Countries. All other countries are in Category II.
b) The following operational criteria and procedures apply when classifying countries:
1) Classification for Arrangement purposes is determined by per capita GNI as calculated by
the World Bank for the purposes of the World Bank classification of borrowing countries.
2) In cases where the World Bank does not have enough information to publish per capita GNI
data, the World Bank shall be asked to estimate whether the country in question has per
capita GNI above or below the current threshold. The country shall be classified according
to the estimate unless the Participants decide to act otherwise.
3) If a country is reclassified in accordance with Article 10 a), the reclassification will takeeffect two weeks after the conclusions drawn from the above-mentioned data from the WorldBank have been communicated to all Participants by the Secretariat.
4) In cases where the World Bank revises figures, such revisions shall be disregarded in relation
to the Arrangement. Nevertheless, the classification of a country may be changed by way of
a Common Line and Participants would favourably consider a change due to errors andomissions in the figures subsequently recognised in the same calendar year in which thefigures were first distributed by the Secretariat.
c) A country will change category only after its World Bank category has remained unchanged fortwo consecutive years.

11.

DOWN PAYMENT, MAXIMUM OFFICIAL SUPPORT AND LOCAL COSTSa) The Participants shall require purchasers of goods and services, which are the subject of official
support, to make down payments of a minimum of 15% of the export contract value at or before
the starting point of credit as defined in Annex XIII. For the assessment of down payments, theexport contract value may be reduced proportionally if the transaction includes goods andservices from a third country which are not officially supported. Financing/insurance of 100%of the premium is permissible. Premium may or may not be included in the export contract
value. Retention payments made after the starting point of credit are not regarded as down
payment in this context.
b) Official support for such down payments shall only take the form of insurance or guarantee
against the usual pre-credit risks.
c) Except as provided for in paragraphs b) and d), the Participants shall not provide official supportin excess of 85% of the export contract value, including third country supply but excluding local
costs.
d) The Participants may provide official support for local costs, under the following conditions:1) The maximum amount of official support for local costs shall not exceed:‒ For Category I countries, 40% of the export contract value.
‒ For Category II countries, 50% of the export contract value.

2

Defined by the World Bank on an annual basis according to per capita GNI.

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2) Official support for local costs shall not be provided on terms more favourable/less restrictive
than those agreed for the related exports.
3) Where official support for local costs exceeds 15% of the export contract value, such official
support shall be subject to prior notification, pursuant to Article 44, specifying the nature of
the local costs being supported.

12.

MAXIMUM REPAYMENT TERMSa) The repayment term shall not exceed the useful life of the goods and services exported or, as
appropriate, the useful life of the project to which goods and services are being exported.
b) Notwithstanding Article 12 a), the maximum repayment term is 15 years.
c) Notwithstanding Article 12 b), the maximum repayment term for any power plant3 that is not
eligible to be supported under Annex I or II is 12 years.
d) The Participant shall give prior notification in accordance with Article 44 when official support
will be provided for any transaction with a repayment term of greater than ten years and that hasa credit value of SDR 10 million or more.

13.

REPAYMENT OF PRINCIPAL AND PAYMENT OF INTERESTa) The principal sum of an export credit shall normally be repaid in equal and regular instalmentsor, when appropriate (e.g. when support is provided for lease transactions or for the export ofstand-alone machinery or equipment), equal repayments of principal and interest combined.
b) Principal shall be repaid no less frequently than annually and the first instalment of principal
shall be made no later than one year after the starting point of credit.
c) Interest shall be paid no less frequently than every six months and the first payment of interest
shall be made no later than six months after the starting point of credit. In the case of annual
repayments of principal, interest shall be paid no less frequently than every twelve months andthe first payment of interest shall be made no later than twelve months after the starting point ofcredit.
d) Interest due after the starting point of credit shall not be capitalised.
e) When duly justified by an imbalance between the timing of funds available to the obligor andthe debt service profile permitted according to the parameters set out in paragraphs a) and b)
above, or when the amortization schedule does not match the obligor or project’s free cash flow,
export credits may be provided within the following constraints:
1) No single repayment of principal or series of principal payments within a six-month period
shall exceed 30% of the principal sum of the credit.

For the purposes of the Arrangement, the term “power plant” comprises complete power plants or parts
thereof, including all components, equipment, materials and services (including the training of personnel) directly
required for the construction and commissioning of the plant. This does not include items for which the buyer isusually responsible, in particular costs associated with land development, roads, construction villages, power lines,
and switchyard and water supply located outside the power plant site boundary, as well as costs arising in the buyer’s
country from official approval procedures (e.g. site permits, construction permit, fuel loading permits).
3

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TAD/PG(2023)7  112) The first repayment of principal shall be made no later than 24 months after the starting pointof credit.
3) The maximum weighted average life of the repayment period is the greater of 65% of therepayment term of the transaction or 6 years.
f) The Participant shall give prior notification in accordance with Article 44 when official support
is provided according to Article 13 e) above for any transaction with a credit value of
SDR 10 million or more. In such notifications, Participants shall, inter alia, provide:1) detailed information on the repayment profile supported and an explanation of the reasons
why there is an imbalance between the timing of funds available to the obligor and the debt
service profile permitted according to Articles 13 a) and 13 b), and2) for transactions with a repayment profile that does not match the free cash flow, a detailed
and adequate justification of the repayment profile supported.

14.

INTEREST RATES, PREMIUM RATES AND OTHER FEESa) Interest excludes:
1) any payment by way of premium or other charge for insuring or guaranteeing supplier credits
or financial credits;
2) any payment by way of banking fees or commissions relating to the export credit other thanannual or semi-annual bank charges that are payable throughout the repayment period; and3) withholding taxes imposed by the importing country.
b) Where official support is provided by means of direct credits/financing or refinancing, thepremium either may be added to the face value of the interest rate or may be a separate charge;
both components are to be specified separately to the Participants.

15.

VALIDITY PERIOD FOR EXPORT CREDITS

Financial terms and conditions for an individual export credit or line of credit, other than the validity
period for the Commercial Interest Reference Rates (CIRRs) set out in Annex XII, shall not be fixed fora period exceeding six months prior to final commitment.

16.

ACTION TO AVOID OR MINIMISE LOSSESThe Arrangement does not prevent export credit authorities or financing institutions from agreeing to lessrestrictive financial terms and conditions than those provided for by the Arrangement, if such action istaken after the contract award (when the export credit agreement and ancillary documents have alreadybecome effective) and is intended solely to avoid or minimise losses from events which could give rise to
non-payment or claims.

17.

MATCHING

Taking into account a Participant’s international obligations and consistent with the purpose of the
Arrangement, a Participant may match, according to the procedures set out in Article 41, financial terms
and conditions offered by a Participant or a non-Participant. Financial terms and conditions provided inaccordance with this Article are considered to be in conformity with the provisions of Chapters I, II and,
when applicable, Annexes I, II, III, and IV.

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18. MINIMUM FIXED INTEREST RATES UNDER OFFICIAL FINANCINGSUPPORTa) The Participants providing official financing support for fixed rate loans shall apply the relevant
CIRRs as minimum interest rates. CIRRs are interest rates established according to thefollowing principles:
1) CIRRs should represent final commercial lending interest rates in the domestic market of thecurrency concerned;
2) CIRRs should closely correspond to the rate for first class domestic borrowers;
3) CIRRs should be based on the funding cost of fixed interest rate finance;4) CIRRs should not distort domestic competitive conditions; and
5) CIRRs should closely correspond to a rate available to first class foreign borrowers.
b) The provision of official financing support shall not offset or compensate, in part or in full, forthe appropriate credit risk premium to be charged for the risk of non-repayment pursuant to theprovisions of Article 20.

19.

CONSTRUCTION AND APPLICATION OF CIRRs

The CIRR for official financing support provided under the Arrangement and all of its Annexes other thanthe Sector Understanding on Export Credits for Civil Aircraft (Annex III) and the Sector Understanding
on Export Credits for Ships (Annex IV) is determined and applied according to the provisions ofAnnex XII.

20.

PREMIUM FOR CREDIT RISKThe Participants shall charge premium, in addition to interest charges, to cover the risk of non-repaymentof export credits. The premium rates charged by the Participants shall be risk-based, shall converge andshall not be inadequate to cover long-term operating costs and losses.

21.

MINIMUM PREMIUM RATES FOR CREDIT RISKThe Participants shall charge no less than the applicable Minimum Premium Rate (MPR) for Credit Risk.
a) The applicable MPR is determined according to the following factors:‒ the applicable country risk classification;‒ the time at risk (i.e. the Horizon of Risk or HOR);‒ the selected buyer risk category of the obligor;‒ the percentage of political and commercial risk cover and quality of official export credit
product provided;‒ any country risk mitigation technique applied; and‒ any buyer risk credit enhancements that have been applied.
b) MPRs are expressed in percentages of the principal value of the credit as if premium werecollected in full at the date of the first drawdown of the credit. An explanation of how to calculate
the MPRs, including the mathematical formula, is provided in Annex VII.

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TAD/PG(2023)7  13c) Irrespective of the destination country, the premium rates charged by Participants for Market
Benchmark Transactions, i.e., transactions involving ultimate obligors/guarantors (i.e. credit
risk entities) in Category 0 Countries, High Income OECD Countries and High Income EuroArea Countries4, or involving a multilateral or regional institution that the Participants agree isgenerally exempt from the monetary control and transfer regulations of the country in which it
is located5 shall be determined on a case-by-case basis. In order to ensure that the premium rates
charged for transactions involving obligors, and where appropriate guarantors, in such countries
do not undercut private market pricing, the Participants shall adhere to the following procedures,using agreed conventions to translate the relevant benchmark pricing into premium rates:
1) Where a Participant provides official support as part of a syndicated loan package that is
structured as either an asset-backed6 or project finance7 transaction, then:‒ the all-in cost of the direct lending portion shall be no less than the all-in cost charged by
the commercial market participant(s) in the syndicate;‒ the premium charged for pure cover shall be no less than the translated equivalentpremium rate charged by the commercial market participant(s) and no less than theapplicable Minimum Actuarial Premium rate; and‒ the Participant applying a premium rate based on a syndicated loan package shall giveprior notification according to Article 44.
To qualify as a syndicated loan package, all of the following conditions must be met:
‒ At least 25% of the syndicate is commercial market loan(s)/guarantee(s), without any
bilateral or multilateral support (e.g., ECA, DFI, IFI or MDB)8, where all parties to thefinancing are on pari passu terms on all financial terms and conditions, including security
package; and4

The status of a country in terms of: (1) whether it is a High Income country (as defined by the World Bankon an annual basis according to per capita GNI), (2) membership in the OECD and (3) whether it is part of the EuroArea is reviewed on an annual basis. The designation of a country under Article 21 c) as a High Income OECD
country or a High Income Euro Area country as well as the removal of such designation will only come into effectafter the country’s income classification (High Income or otherwise) has remained unchanged for two consecutive
years. A change in a country’s designation as a High Income OECD country or a High Income Euro Area country
as well as the removal of such designation related to a change in OECD membership or being part of the Euro Area
will come into effect immediately at the time of the annual review of countries’ status.
5

The assessment of whether or not a Multilateral or Regional Institution is generally exempt from the monetarycontrol and transfer regulations of the country in which it is located shall be made based on the criteria set out inAnnex VIII, The Participants shall maintain a list of the institutions deemed as meeting the criteria and, therefore,
subject to the premium rates for Market Benchmark Transactions.
6

To qualify as an asset-backed transaction, there must be a first priority security interest on the asset being
financed; and, in the case of a lease structure, assignment and/or a first priority security interest in connection withthe lease payments.
7

To qualify as a project finance transaction, the transaction must involve the export of goods or services to anindependent (legally and economically) project company whereby, (1) the cashflows and earnings of the projectcompany are considered by the lender to be the source of funds from which a loan will be repaid and (2) the assetsof the project company are considered by the lender to be collateral for the loan.
8This portion of the 25% criterion may be met where the non-cash payment portion of a transaction involving
a single bank receiving ECA cover includes an uncovered portion of at least 25%. Such transactions must meet allof the other criteria of sub-paragraph 1, including the pari passu provisions of this tiret.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified14  TAD/PG(2023)7‒ The transaction financial terms and conditions are fully compliant with the Arrangement,
as modified by these provisions of Market Benchmark pricing in syndicatedloans/guarantees transactions.
2) For all other Market Benchmark Transactions, the following procedures shall apply:‒ Taking into consideration the availability of market information and the characteristics of
the underlying transaction, Participants shall determine the premium rate to be applied bybenchmarking against one or more of the market benchmarks set forth in Annex VIII,
choosing the benchmark(s) deemed most appropriate for the specific transaction.
‒ Notwithstanding the preceding paragraph, Participants may not charge a premium ratethat is lower than the corresponding premium determined by the Through the Cycle
Market Benchmark (TCMB) model, based on the risk classification and total term (WALof the whole transaction) of the transaction unless the market benchmark is derived froma Name-Specific or Related Entity (i) secondary market bond or (ii) Credit Default Swap
(CDS). A Participant charging a premium rate lower than the corresponding premium
determined by the TCMB model, based on the Accredited Credit Rating Agency9 (CRA)
rating of the Name-Specific market benchmark10 shall give prior notification inaccordance with Article 44. However, the premium charged may not be less than thecorresponding Minimum Actuarial Premium.
‒ In determining the premium rate, a Participant shall determine a risk rating for theultimate obligor/guarantor, including whether the obligor/guarantor is rated by an
Accredited CRA. A Participant may set a rating one notch better (on the Accredited
CRA’s scale) than that provided by an Accredited CRA. If there is no Accredited CRA
rating, the risk classification may not exceed (be more favourable than) the CRA ratingof the sovereign in the obligor/guarantor's domicile by more than two notches.
Participants must give prior notification in accordance with Article 44 in the following
scenarios:• Where a Participant classifies the obligor/guarantor as better than the best rating froman Accredited CRA, or• If there is no Accredited CRA rating, where a Participant classifies a transaction as
CC2 or better, or a credit rating letter equivalent to AAA to A-, or equal to or morefavourable than the best Accredited CRA rating of the sovereign in the
obligor’s/guarantor’s domicile.
d) The “highest risk” countries in Category 7 shall, in principle, be subject to premium rates inexcess of the MPRs established for that Category; these premium rates shall be determined by
the Participant providing official support.

9

Where the obligor/guarantor is rated by more than one Accredited CRA, the CRA rating is the best available
foreign currency rating on a senior unsecured basis for the obligor (or guarantor). The Secretariat shall compile andmaintain a list of such accredited CRAs.
10

In the event that a relevant Name-Specific market pricing entity is not rated by an Accredited CRA, then the
resulting market pricing shall be considered to be below the corresponding TCMB rate and be subject to priornotification in accordance with Article 44.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  15e) In calculating the MPR for a transaction, the applicable country risk classification shall be theclassification of the obligor’s country and the applicable buyer risk classification shall be theclassification of the obligor11, unless security in the form of an irrevocable, unconditional,
on-demand, legally valid and enforceable guarantee of the total debt repayment obligation for
the entire duration of the credit is provided by a third party that is creditworthy in relation to thesize of the guaranteed debt. In the case of a third party guarantee, a Participant may choose to
apply the country risk classification of the country in which the guarantor is located and thebuyer risk category of the guarantor.12f) The criteria and conditions relating to the application of a third party guarantee according to thesituations described in paragraph e) above are set out in Annex VIII.
g) The HOR convention used in the calculation of an MPR is one-half of the disbursement period
plus the entire repayment period and assumes a regular export credit repayment profile,i.e. repayment in equal semi-annual instalments of principal plus accrued interest beginning six
months after the starting point of credit. For export credits with non-standard repayment profiles,
the equivalent repayment period (expressed in terms of equal, semi-annual instalments) is
calculated using the following formula: equivalent repayment period = (average weighted lifeof the repayment period -0.25) / 0.5.
h) The Participant choosing to apply an MPR associated with a third party guarantor located in acountry other than that of the obligor shall give prior notification according to Article 43.

22.

COUNTRY RISK CLASSIFICATIONWith the exception of High Income OECD countries and High Income Euro Area countries, countries
shall be classified according to the likelihood of whether they will service their external debts (i.e. country
credit risk).
a) The five elements of country credit risk are:‒ general moratorium on repayments decreed by the obligor’s/guarantor's government or bythat agency of a country through which repayment is effected;‒ political events and/or economic difficulties arising outside the country of the notifying
Participant or legislative/administrative measures taken outside the country of the notifying
Participant which prevent or delay the transfer of funds paid in respect of the credit;‒ legal provisions adopted in the obligor’s/guarantor’s country declaring repayments made in
local currency to be a valid discharge of the debt, notwithstanding that, as a result offluctuations in exchange rates, such repayments, when converted into the currency of thecredit, no longer cover the amount of the debt at the date of the transfer of funds;‒ any other measure or decision of the government of a foreign country which prevents
repayment under a credit; and‒ cases of force majeure occurring outside the country of the notifying Participant, i.e. war(including civil war), expropriation, revolution, riot, civil disturbances, cyclones, floods,
earthquakes, eruptions, tidal waves and nuclear accidents.
11

The premium rates charged for transactions with a third party guarantee provided by an obligor in a
Category 0 country, High Income OECD country, High Income Euro Area country, or by a multilateral or regional
institution deemed as meeting the criteria set out in Annex VIII are subject to the requirements set out in
Article 21 c).
12

In the case of a third party guarantee, the applicable country risk classification and buyer risk category must
be related to the same entity, i.e. either the obligor or the guarantor.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified16  TAD/PG(2023)7b) Countries are classified into one of eight Country Risk Categories (0-7). MPRs have been
established for Categories 1 through 7, but not for Category 0, as the level of country risk is
considered to be negligible for countries in this Category. The credit risk associated withtransactions in Category 0 countries is predominantly related to the risk of the obligor/guarantor.
c) The classification of countries13 is achieved through the Country Risk Classification
Methodology, which is comprised of:‒ The Country Risk Assessment Model (the Model), which produces a quantitative assessmentof country credit risk which is based, for each country, on three groups of risk indicators: thepayment experience of the Participants, the financial situation and the economic situation.
The methodology of the Model consists of different steps including the assessment of thethree groups of risk indicators, and the combination and flexible weighting of the risk
indicator groups.
‒ The qualitative assessment of the Model results, considered country-by-country to integrate
the political risk and/or other risk factors not taken into account in full or in part by the
Model. If appropriate, this may lead to an adjustment to the quantitative Model assessment
to reflect the final assessment of the country credit risk.
d) Country Risk Classifications shall be monitored on an on-going basis and reviewed at least
annually and changes resulting from the Country Risk Classification Methodology shall be
immediately communicated by the Secretariat. When a country is re-classified in a lower orhigher Country Risk Category, the Participants shall, no later than five working days after the
re classification has been communicated by the Secretariat, charge premium rates at or above
the MPRs associated with the new Country Risk Category.
e) The country risk classifications shall be made public by the Secretariat.

23.

SOVEREIGN RISK ASSESSMENTa) For all countries classified through the Country Risk Classification Methodology according to
Article 22 d), the risk of the sovereign shall be assessed in order to identify, on an exceptional
basis, those sovereigns:‒ that are not the lowest-risk obligor in the country and;‒ whose credit risk is significantly higher than country risk.
b) The identification of sovereigns meeting the criteria listed in paragraph a) above shall be
undertaken according to the Sovereign Risk Assessment Methodology that has been developed
and agreed by the Participants.
c) The list of sovereigns identified as meeting the criteria listed in paragraph a) above shall bemonitored on an on-going basis and reviewed at least annually and changes resulting from theSovereign Risk Assessment Methodology shall be immediately communicated by the
Secretariat.
d) The list of sovereigns identified under paragraph b) above shall be made public by the
Secretariat.

13

For administrative purposes, some countries that are eligible to be classified into one of the eight Country
Risk Categories may not be classified if they do not generally receive officially supported export credits. For suchnon-classified countries, Participants are free to apply the country risk classification which they deem appropriate.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  17

24.

BUYER RISK CLASSIFICATION

Obligors and, as appropriate, guarantors in countries classified in Country Risk Categories 1-7 shall beclassified into one of the buyer risk categories that have been established in relation to the country of theobligor/guarantor14. The matrix of buyer risk categories into which obligors and guarantors shall beclassified is provided in Annex VI. Qualitative descriptions of the buyer risk categories are provided in
Annex IX.
a) Buyer-risk classifications shall be based on the senior unsecured credit rating of theobligor/guarantor as determined by the Participant.
b) Notwithstanding paragraph a) above, transactions having a credit value of SDR 5 million or lessmay be classified on a transaction basis, i.e. after the application of any buyer risk credit
enhancements; however, such transactions, regardless of how they are classified, are not eligible
for any discounts for the application of buyer risk credit enhancements.
c) Sovereign obligors and guarantors are classified in buyer risk category SOV/CC0.
d) On an exceptional basis, non-sovereign obligors and guarantors may be classified in the “Better
than Sovereign” (SOV+) buyer risk category if15:‒ the obligor/guarantor has a foreign currency rating from an Accredited CRA that is better
than the foreign currency rating (from the same CRA) of their respective sovereign, or‒ the obligor/guarantor’s is located in a country in which sovereign risk has been identified as
being significantly higher than country risk.
e) The Participants shall give prior notification according to Article 44 for transactions:‒ with a non-sovereign obligor/guarantor where the premium charged is below that set by
Buyer Risk Category CC1, i.e. CC0 or SOV+;‒ with a non-sovereign obligor/guarantor where a Participant assesses a buyer risk rating for anon-sovereign obligor/guarantor that is rated by an Accredited CRA, and the buyer risk
rating assessed is better than the Accredited CRA rating16.
f) In the event of competition for a specific transaction, whereby the obligor/guarantor has beenclassified by competing Participants in different buyer risk categories, the competing
Participants shall seek to arrive at a common buyer risk classification. If agreement on acommon classification is not reached, the Participant(s) having classified the obligor/guarantor
in a higher buyer risk classification are not prohibited from applying the lower buyer risk
classification.

14

Rules related to the classification of buyers should be understood to stipulate the most favourable
classification that can be applied, e.g. a sovereign buyer may be classified in a less favourable buyer risk
classification.
15

The MPRs associated with the Better than Sovereign (SOV+) buyer risk category are 10% lower than the
MPRs associated with the Sovereign (CC0) buyer risk category.
16

Where the non-sovereign borrower is rated by more than one accredited CRA, notification is only required
where the buyer risk rating is more favourable than the most favourable of the CRA ratings.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

18  TAD/PG(2023)7

25.

PERCENTAGE AND QUALITY OF OFFICIAL EXPORT CREDIT COVER

The MPRs are differentiated to take account of the differing quality of export credit products andpercentage of cover provided by the Participants as set out in Annex VI. The differentiation is based on
the exporter’s perspective (i.e. to neutralise the competitive effect arising from the differing qualities of
product provided to the exporter/financial institution).
a) The quality of an export credit product is a function of whether the product is insurance,
guarantee or direct credit/financing, and for insurance products whether cover of interest during
the claims waiting period (i.e. the period between the due date of payment by the obligor andthe date that the insurer is liable to reimburse the exporter/financial institution) is provided
without a surcharge.
b) All existing export credit products offered by the Participants shall be classified into one of thethree product categories which are:
‒ Below standard product, i.e. insurance without cover of interest during the claims waiting
period and insurance with cover of interest during the claims waiting period with anappropriate premium surcharge;‒ Standard product, i.e. insurance with cover of interest during the claims waiting period
without an appropriate premium surcharge and direct credit/financing; and‒ Above standard product, i.e. guarantees.

26.

COUNTRY RISK MITIGATION TECHNIQUESa) The Participants may apply the following country risk mitigation techniques, the specificapplication of which is set out in Annex X:‒ Offshore Future Flow Structure Combined with Offshore Escrow Account‒ Local Currency Financingb) The Participant applying an MPR reflecting the use of country risk mitigation shall give priornotification according to Article 43.
c) No country risk mitigation shall be applied to Market Benchmark transactions.

27.

BUYER RISK CREDIT ENHANCEMENTSa) The Participants may apply the following buyer risk credit enhancements (BRCE) which allow
for the application of a Credit Enhancement Factor (CEF) greater than 0:‒ Assignment of Contract Proceeds or Receivables‒ Asset Based Security‒ Fixed Asset Security‒ Escrow Accountb) Definitions of the BRCE and maximum CEF values for both Category 1-7 obligors as well as
Market Benchmark obligors are set out in Annex X.
c) BRCEs may be used alone or in combination with the following restrictions:‒ The maximum CEF that can be achieved through the use of the BRCEs is 0.35 forCategory 1-7 transactions. For Market Benchmark transactions, a maximum discount of 25%
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS

Unclassified

TAD/PG(2023)7  19

may be applied to the Market Benchmark MPR, but the premium charged may not be lower
than the applicable Minimum Actuarial Premium rate.
‒ “Asset Based Security” and “Fixed Asset Security” cannot be used together in one
transaction.
‒ In a Category 1-7 transaction where the applicable country risk classification has been
improved through the use of “Offshore Future Flow Structure Combined with Offshore
Escrow Account”, no BRCEs may be applied.
d) The Participants shall give prior notification according to Article 44 for transactions with anon-sovereign obligor/guarantor where BRCEs result in the application of a CEF of greaterthan 0, or whenever BRCEs are used in a Market Benchmark transaction that result in pricing
below the corresponding TCMB MPR.

28.

VALIDITY OF THE MINIMUM PREMIUM RATES FOR CREDIT RISKa) To assess the adequacy of MPRs and to allow, if necessary, for adjustments, either upwards or
downwards, Premium Feedback Tools (PFTs), shall be used in parallel to monitor and adjust
the MPRs on a regular basis.
b) The PFTs shall assess the adequacy of the MPRs in terms of both the actual experience ofinstitutions providing official export credits as well as private market information on the pricingof credit risk.

CHAPTER III: PROVISIONS FOR TIED AID

29.

GENERAL PRINCIPLESa) The Participants have agreed to have complementary policies for export credits and tied aid.
Export credit policies should be based on open competition and the free play of market forces.
Tied aid policies should provide needed external resources to countries, sectors or projects withlittle or no access to market financing. Tied aid policies should ensure best value for money,
minimise trade distortion, and contribute to developmentally effective use of these resources.
b) The tied aid provisions of the Arrangement do not apply to the aid programmes of multilateralor regional institutions.
c) These principles do not prejudge the views of the Development Assistance Committee (DAC)on the quality of tied and untied aid.
d) A Participant may request additional information relevant to the tying status of any form of aid.
If there is uncertainty as to whether a certain financing practice falls within the scope of thedefinition of tied aid set out in Annex XIII, the donor country shall furnish evidence in supportof any claim to the effect that the aid is in fact “untied” in accordance with the definition in
Annex XIII.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified20  TAD/PG(2023)7

30.

FORMS OF TIED AID

Tied aid can take the form of:a) Official Development Assistance (ODA) loans as defined in the “DAC Guiding Principles for
Associated Financing and Tied and Partially Untied Official Development Assistance (1987)”;b) ODA grants as defined in the “DAC Guiding Principles for Associated Financing and Tied andPartially Untied Official Development Assistance (1987)”; andc) Other Official Flows (OOF), which includes grants and loans but excludes officially supported
export credits that are in conformity with the Arrangement; ord) Any association, e.g. mixture, in law or in fact, within the control of the donor, the lender or the
borrower involving two or more of the preceding, and/or the following financing components:
1) an export credit that is officially supported by way of direct credit/financing, refinancing,interest rate support, guarantee or insurance to which the Arrangement applies; and2) other funds at or near market terms, or down payment from the purchaser.

31.

ASSOCIATED FINANCINGa) Associated financing may take various forms including mixed credits, mixed financing, joint
financing, parallel financing or single integrated transactions. The main characteristics are thatthey all feature:‒ a concessional component that is linked in law or in fact to the non-concessional component;‒ either a single part or all of the financing package that is, in effect, tied aid; and‒ concessional funds those are available only if the linked non-concessional component is
accepted by the recipient.
b) Association or linkage “in fact” is determined by such factors as:‒ the existence of informal understandings between the recipient and the donor authorities;‒ the intention by the donor to facilitate the acceptability of a financing package through theuse of ODA;
‒ the effective tying of the whole financing package to procurement in the donor country;‒ the tying status of ODA and the means of tendering for or contracting of each financing
transaction; or‒ any other practice, identified by the DAC or the Participants in which a de facto liaison exists
between two or more financing components.
c) The following practices shall not prevent the determination of an association or linkage “infact”:‒ contract splitting through the separate notification of the component parts of one contract;‒ splitting of contracts financed in several stages;‒ non notification of interdependent parts of a contract; and/or‒ non notification because part of the financing package is untied.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  21

32.

COUNTRY ELIGIBILITY FOR TIED AIDa) There shall be no tied aid to countries whose per capita GNI, according to the World Bank data,
is above the upper limit for lower middle income countries. The World Bank recalculates thisthreshold on an annual basis17. A country will be reclassified only after its World Bank category
has been unchanged for two consecutive years.
b) The following operational criteria and procedures apply when classifying countries:
1) Classification for Arrangement purposes is determined by per capita GNI as calculated by
the World Bank for the purposes of the World Bank classification of borrowing countries;
this classification shall be made public by the Secretariat.
2) In cases where the World Bank does not have enough information to publish per capita GNI
data, the World Bank shall be asked to estimate whether the country in question has per
capita GNI above or below the current threshold. The country shall be classified according
to the estimate unless the Participants decide to act otherwise.
3) If a country’s eligibility for tied aid does change in accordance with paragraph a) above, thereclassification shall take effect two weeks after the conclusions drawn from theabove-mentioned World Bank data have been communicated to all Participants by the
Secretariat. Before the effective date of reclassification, no tied aid financing for a newly
eligible country may be notified; after that date, no tied aid financing for a newly promoted
country may be notified, except that individual transactions covered under a prior committed
credit line may be notified until the expiry of the credit line (which shall be no more than
one year from the effective date).
4) In cases where the World Bank revises figures such revisions shall be disregarded in relation
to the Arrangement. Nevertheless, the classification of a country may be changed by way of
a Common Line, in accordance with the appropriate procedures in Articles 54 to 59, and theParticipants would favourably consider a change due to errors and omissions in the figuressubsequently recognised in the same calendar year as the figures that were first distributedby the Secretariat.

33.

PROJECT ELIGIBILITYa) Tied aid shall not be extended to public or private projects that normally should be commercially
viable if financed on market or Arrangement terms.
b) The key tests for such aid eligibility are:‒ whether the project is financially non-viable, i.e. does the project lack capacity withappropriate pricing determined on market principles, to generate cash flow sufficient to cover
the project's operating costs and to service the capital employed, i.e. the first key test; or‒ whether it is reasonable to conclude, based on communication with other Participants, that it
is unlikely that the project can be financed on market or Arrangement terms, i.e. the second
key test. In respect of projects larger than SDR 50 million special weight shall be given to
the expected availability of financing at market or Arrangement terms when considering theappropriateness of such aid.

17

Based on the annual review by the World Bank of its country classification, a per capita Gross National
Income (GNI) threshold will be used for the purpose of tied aid eligibility; such threshold is available on the OECD
website (https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/financing-termsand-conditions/).
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified22  TAD/PG(2023)7c) The key tests under paragraph b) above are intended to describe how a project should be
evaluated to determine whether it should be financed with such aid or with export credits onmarket or Arrangement terms. Through the consultation process described in Articles 47 to 49,
a body of experience is expected to develop over time that will more precisely define, for both
export credit and aid agencies, ex ante guidance as to the line between the two categories ofprojects.
d) Any Participant desiring to provide aid for goods and/or services covered by the Sector
Understanding on Export Credits for Ships must confirm that the ship is not operated under anopen registry during the repayment term and that appropriate assurance has been obtained thatthe ultimate owner resides in the receiving country, is not a non-operational subsidiary of aforeign interest and has undertaken not to sell the ship without its government’s approval.

34.

MINIMUM CONCESSIONALITY LEVELThe Participants shall not provide tied aid that has a concessionality level of less than 35%, or 50% if thebeneficiary country is a Least Developed Country (LDC), except for the cases set out below, which arealso exempt from the notification procedures set out in Articles 45 a) and 46 a):a) Technical assistance: tied aid where the official development aid component consists solely oftechnical co-operation that is less than either 3% of the total value of the transaction orSDR 1 million, whichever is lower; andb) Small projects: capital projects of less than SDR 1 million that are funded entirely bydevelopment assistance grants.

35.

EXEMPTIONS FROM COUNTRY OR PROJECT ELIGIBILITY FOR TIED AIDa) The provisions of Articles 32 and 33 do not apply to tied aid where the concessionality level is
80% or more except for tied aid that forms part of an associated financing package, describedin Article 31.
b) The provisions of Article 33 do not apply to tied aid with a value of less than SDR 2 million
except for tied aid that forms part of an associated financing package, described in Article 31.
c) Tied aid for LDCs as defined by the United Nations is not subject to the provisions of Articles 32
and 33.
d) The Participants shall give favourable consideration to an acceleration of tied aid procedures inline with the specific circumstances:‒ a nuclear or major industrial accident that causes serious transfrontier pollution, where any
affected Participant wishes to provide tied aid to eliminate or mitigate its effects, or‒ the existence of a significant risk that such an accident may occur, where any potentiallyaffected Participant wishes to provide tied aid to prevent its occurrence.
e) Notwithstanding Articles 32 and 33, a Participant may, exceptionally, provide support by oneof the following means:‒ the Common Line procedure as defined in Annex XIII and described in Articles 54 to 59; or‒ the justification on aid grounds through support by a substantial body of the Participants as
described in Articles 47 and 48; or‒ a letter to the OECD Secretary-General, in accordance with the procedures in Article 49,
which the Participants expect will be unusual and infrequent.
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS

Unclassified

TAD/PG(2023)7  23

36.

CALCULATION OF CONCESSIONALITY LEVEL OF TIED AID

The concessionality level of tied aid is calculated using the same method as for the grant element used by
the DAC, except that:a) The discount rate used to calculate the concessionality level of a loan in a given currency, i.e. theDifferentiated Discount Rate (DDR), is subject to annual change on 15 January and is calculated
as follows18:‒ The average of the CIRR using seven-year government bond yields + Margin
Margin (M) depends on the repayment term (R) as follows:RM

less than 15 years

0.75

from 15 years up to, but not including 20 years

1.00

from 20 years up to but not including 30 years

1.15

from 30 years and above

1.25‒ For all currencies the average of the CIRR using seven-year government bond yields is
calculated taking an average of the monthly rates valid during the six-month period between
15 August of the previous year and 14 February of the current year, as determined according
to the provisions of Annex XII. The calculated rate, including the Margin, is rounded to thenearest ten basis points.
b) The base date for the calculation of the concessionality level is the starting point of credit as set
out in Annex XIII.
c) For the purpose of calculating the overall concessionality level of an associated financing
package, the concessionality levels of the following credits, funds and payments are considered
to be zero:‒ export credits that are in conformity with the Arrangement;‒ other funds at or near market rates;‒ other official funds with a concessionality level of less than the minimum permitted under
Article 34 except in cases of matching; and‒ down payment from the purchaser.
Payments on or before the starting point of credit that are not considered down payment shallbe included in the calculation of the concessionality level.
d) The discount rate in matching: in matching aid, identical matching means matching with an
identical concessionality level that is recalculated with the discount rate in force at the time ofmatching.
e) Local costs and third country procurement shall be included in the calculation of concessionality
level only if they are financed by the donor country.

18

With new CIRR rules having been agreed, the calculation of the DDR according to the approach provided in
Article 36 a) is temporary pending further discussions by the Participants.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified24  TAD/PG(2023)7f) The overall concessionality level of a package is determined by multiplying the nominal valueof each component of the package by the respective concessionality level of each component,
adding the results, and dividing this total by the aggregate nominal value of the components.
g) The discount rate for a given aid loan is the rate in effect at the time of notification. However,in cases of prompt notification, the discount rate is the one in effect at the time when the terms
and conditions of the aid loan were fixed. A change in the discount rate during the life of a loan
does not change its concessionality level.
h) If a change of currency is made before the contract is concluded, the notification shall be revised.
The discount rate used to calculate the concessionality level will be the one applicable at thedate of revision. A revision is not necessary if the alternative currency and all the necessary
information for calculation of the concessionality level are indicated in the original notification.
i) Notwithstanding paragraph g) above, the discount rate used to calculate the concessionality levelof individual transactions initiated under an aid credit line shall be the rate that was originally
notified for the credit line.

37.

VALIDITY PERIOD FOR TIED AIDa) The Participants shall not fix terms and conditions for tied aid, whether this relates to thefinancing of individual transactions or to an aid protocol, an aid credit line or to a similar
agreement, for more than two years. In the case of an aid protocol, an aid credit line or similar
agreement, the validity period shall commence at the date of its signature, to be notified inaccordance with Article 46; the extension of a credit line shall be notified as if it were a newtransaction with a note explaining that it is an extension and that it is renewed at terms allowed
at the time of the notification of the extension. In the case of individual transactions, including
those notified under an aid protocol, an aid credit line or similar agreement, the validity period
shall commence at the date of notification of the commitment in accordance with Article 45 or
46, as appropriate.
b) When a country has become ineligible for 17-year World Bank Loans for the first time, thevalidity period of existing and new tied aid protocols and credit lines notified shall be restricted
to one year after the date of the potential reclassification in accordance with procedures in
Article 32 b).
c) Renewal of such protocols and credit lines is possible only on terms which are in accordancewith the provisions of Articles 32 and 33 of the Arrangement following:‒ the reclassification of countries; and‒ a change in the provisions of the Arrangement.
In these circumstances, the existing terms and conditions can be maintained notwithstanding achange in the discount rate set out in Article 36.

38.

MATCHING

Taking into account a Participant’s international obligations and consistent with the purpose of the
Arrangement, a Participant may match, according to the procedures set out in Article 41, financial terms
and conditions offered by a Participant or a non-Participant.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  25

CHAPTER IV: PROCEDURESSECTION 1: COMMON PROCEDURES FOR EXPORT CREDITS AND
TRADE-RELATED AID
39.

NOTIFICATIONSThe notifications set out by the procedures in the Arrangement shall be made in accordance with, andinclude the information contained in Annex V, and shall be copied to the Secretariat.

40.

INFORMATION ON OFFICIAL SUPPORTa) As soon as a Participant commits the official support which it has notified in accordance withthe procedures in Articles 43 to 46, it shall inform all other Participants accordingly by including
the notification reference number on the relevant ex-post reporting form.
b) In an exchange of information in accordance with Articles 51 to 53, a Participant shall informthe other Participants of the credit terms and conditions that it envisages supporting for aparticular transaction and may request similar information from the other Participants.
c) In addition to the information stipulated in Annex V that is provided for transactions that havebeen prior-notified under Article 43 or 44, Participants shall provide, in the relevant ex-post
reporting form:
1) for all transactions supported, information related to the actual repayment term andrepayment profile on an ex-post basis, including, inter alia, the following items: (1) the
length of the repayment term, (2) the repayment profile, (3) the frequency of principal
repayments, (4) the frequency of interest payments, (5) the length of time between thestarting point of credit and the first repayment of principal, and where relevant, (6) the
weighted average life of the repayment period, (7) percentage of principal repaid by the
mid-point of the credit, (8) maximum single instalment, (9) explanation of imbalance
between timing of funds available and the debt service profile used, and (10) detailed andadequate justification of repayment profile supported if the repayment profile does notmatch the free cash flow.
2) in addition, for transactions supported under Article 13 e) that have not been prior-notified,Participants shall also provide:‒ an explanation of the reasons why there is an imbalance between the timing of funds
available to the obligor and the debt service profile permitted according to
Articles 13 a) and 13 b), and‒ for transactions with a repayment profile that does not match the free cash flow, adetailed and adequate justification of the repayment profile supported.

41.

PROCEDURES FOR MATCHINGa) Before matching financial terms and conditions assumed to be offered by a Participant or a
non-Participant pursuant to Articles 17 and 38, a Participant shall make every reasonable effort,

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Unclassified26  TAD/PG(2023)7
including as appropriate by use of the face-to-face consultations described in Article 53, toverify that these terms and conditions are officially supported and shall comply with thefollowing:1) The Participant shall notify all other Participants of the terms and conditions it intends tosupport following the same notification procedures required for the matched terms andconditions. In the case of matching a non-Participant, the matching Participant shall follow
the same notification procedures that would have been required had the matched terms beenoffered by a Participant.
2) Notwithstanding sub-paragraph 1) above, if the applicable notification procedure would
require the matching Participant to withhold its commitment beyond the final bid closing
date, then the matching Participant shall give notice of its intention to match as early as
possible.
3) If the initiating Participant moderates or withdraws its intention to support the notified terms
and conditions, it shall immediately inform all other Participants accordingly.
b) A Participant intending to offer identical financial terms and conditions to those notified
according to Articles 43 and 44 may do so once the waiting period stipulated therein has expired.
This Participant shall give notification of its intention as early as possible.

42.

SPECIAL CONSULTATIONSa) A Participant that has reasonable grounds to believe that financial terms and conditions offeredby another Participant (the initiating Participant) are more generous than those provided for in
the Arrangement shall inform the Secretariat; the Secretariat shall immediately make available
such information.
b) The initiating Participant shall clarify the financial terms and conditions of its offer within two
working days following the issue of the information from the Secretariat.
c) Following clarification by the initiating Participant, any Participant may request that a special
consultation meeting of the Participants be organised by the Secretariat within five working days
to discuss the issue.
d) Pending the outcome of the special consultation meeting of the Participants, financial terms andconditions benefiting from official support shall not become effective.

SECTION 2: PROCEDURES FOR EXPORT CREDITS43.

PRIOR NOTIFICATION WITH DISCUSSIONa) A Participant shall notify all other Participants at least ten calendar days before issuing any
commitment with a credit value of greater than SDR 10 million in accordance with Annex V if:‒ the applicable country risk classification and buyer risk category used to calculate the MPR
is that of a third party guarantor located outside of the obligor’s country [i.e. determinedaccording to Article 21 e)]; or‒ the applicable MPR has been decreased through the application of a country risk mitigation
technique listed in Article 26.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  27b) A Participant shall notify all other Participants at least ten calendar days before issuing any
commitment with a credit value of greater than SDR 10 million in accordance with Annex V if
the support is extended under Article 6 a) 2) of Annex I.
c) If any other Participant requests a discussion during this period, the initiating Participant shallwait an additional ten calendar days.
d) A Participant shall inform all other Participants of its final decision following a discussion tofacilitate the review of the body of experience in accordance with Article 62. The Participants
shall maintain records of their experience with regard to premium rates notified in accordancewith paragraph a) above.

44.

PRIOR NOTIFICATIONa) A Participant shall, in accordance with Annex V, notify all other Participants at least ten
calendar days before issuing any commitment with a repayment term of greater than ten years
and with a credit value of greater than SDR 10 million.
b) A Participant shall, in accordance with Annex V, notify all other Participants at least ten calendar
days before issuing any commitment with a credit value of greater than SDR 10 million if the
support is provided according to:1) Article 13 f),
2) Article 6 a) of Annex II, or
3) Article 6 a) 1) of Annex I.
c) A Participant shall, in accordance with Annex V, notify all other Participants at least ten calendar
days before issuing any commitment with a credit value of greater than SDR 10 million if the
support is provided in relation to:1) Article 11 d) 3).
2) The application of a premium rate for a market benchmark transaction in accordance withthe provisions of;‒ The third tiret of Article 21 c) 1) when participating as part of a syndicated loan package.
‒ The second tiret of Article 21 c) 2), whereby the premium rate charged is lower than thecorresponding premium determined by the TCMB model.
‒ The third tiret of Article 21 c) 2), whereby a Participant classifies the obligor/guarantor
as better than the best rating from an Accredited CRA; or if there is no rating from an
Accredited CRA and a Participant classifies a transaction as CC2 or better, or a credit
rating letter equivalent to AAA to A-, or equal to or more favourable than the best
Accredited CRA rating of the sovereign in the obligor’s/guarantor’s domicile.
3) The application of a premium rate for a transaction subject to Country Risk Category 1-7
MPRs in accordance with Article 24 e) whereby the selected buyer risk category used to
calculate the MPR for a transaction with a non-sovereign obligor/guarantor is:‒ lower than CC1 (i.e. CC0 or SOV+); or‒ better than the Accredited CRA rating.

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Unclassified28  TAD/PG(2023)7
4) The application of a premium rate in accordance with Article 27 d) for transactions with anon-sovereign obligor/guarantor, whereby the use of buyer risk credit enhancements resultsin the application of a CEF of greater than 0, or whenever BRCEs are used in a Market
Benchmark transaction that result in pricing below the corresponding TCMB MPR.
5) A transaction that is subject to common line as stipulated in Article 59 c).

SECTION 3: PROCEDURES FOR TRADE-RELATED AID
45.

PRIOR NOTIFICATIONa) A Participant shall give prior notification in accordance with Annex V if it intends to provide
official support for:‒ Trade-related untied aid with a value of SDR 2 million or more, and a concessionality levelof less than 80%;
‒ Trade-related untied aid with a value of less than SDR 2 million and a grant element (asdefined by the DAC) of less than 50%;
‒ Trade-related tied aid with a value of SDR 2 million or more and a concessionality level ofless than 80%; or‒ Trade-related tied aid with a value of less than SDR 2 million and a concessionality level ofless than 50%, except for the cases set out in Articles 35 a) and 35 b).
‒ Tied aid in accordance with Article 35 d).
b) Prior notification shall be made at the latest 30 working days before the bid closing orcommitment date, whichever is the earlier.
c) If the initiating Participant moderates or withdraws its intention to support the notified terms
and conditions, it shall immediately inform all other Participants accordingly.
d) The provision of this Article shall apply to tied aid that forms part of an associated financing
package, as described in Article 31.

46.

PROMPT NOTIFICATIONa) A Participant shall promptly notify all other Participants, i.e. within two working days of thecommitment, in accordance with Annex V, if it provides official support for tied aid with a valueof either:‒ SDR 2 million or more and a concessionality level of 80% or more; or‒ less than SDR 2 million and a concessionality level of 50% or more except for the cases set
out in Articles 34 a) and 34 b).
b) A Participant shall also promptly notify all other Participants when an aid protocol, credit line
or similar agreement is signed.
c) Prior notification need not be given if a Participant intends to match financial terms andconditions that were subject to a prompt notification.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  29

SECTION 4: CONSULTATION PROCEDURES FOR TIED AID
47.

PURPOSE OF CONSULTATIONSa) A Participant seeking clarification about possible trade motivation for tied aid may request thata full Aid Quality Assessment (detailed in Annex XI) be supplied.
b) Furthermore, a Participant may request consultations with other Participants, in accordance with
Article 48. These include face-to-face consultations as outlined in Article 53 in order to discuss:‒ first, whether an aid offer meets the requirements of Articles 32 and 33; and‒ if necessary, whether an aid offer is justified even if the requirements of Articles 32 and 33
are not met.

48.

SCOPE AND TIMING OF CONSULTATIONSa) During consultations, a Participant may request, among other items, the following information:‒ the assessment of a detailed feasibility study/project appraisal;‒ whether there is a competing offer with non-concessional or aid financing;‒ the expectation of the project generating or saving foreign currency;‒ whether there is co-operation with multilateral organisations such as the World Bank;‒ the presence of International Competitive Bidding (ICB), in particular if the donor country's
supplier is the lowest evaluated bid;
‒ the environmental implications;‒ any private sector participation; and‒ the timing of the notifications (e.g. six months prior to bid closing or commitment date) ofconcessional or aid credits.
b) The consultation shall be completed and the findings on both questions in Article 46 notified by
the Secretariat to all Participants at least ten working days before the bid closing date orcommitment date, whichever comes first. If there is disagreement among the consulting parties,
the Secretariat shall invite other Participants to express their views within five working days. It
shall report these views to the notifying Participant, which should reconsider going forward ifthere appears to be no substantial support for an aid offer.

49.

OUTCOME OF CONSULTATIONSa) A donor that wishes to proceed with a project despite the lack of substantial support shall provide
prior notification of its intentions to other Participants, no later than 60 calendar days after thecompletion of the Consultation, i.e. acceptance of the Chairman’s conclusion. The donor shallalso write a letter to the Secretary-General of the OECD outlining the results of the consultations
and explaining the overriding non-trade related national interest that forces this action. The
Participants expect that such an occurrence will be unusual and infrequent.
b) The donor shall immediately notify the Participants that it has sent a letter to the Secretary
General of the OECD, a copy of which shall be included with the notification. Neither the donor
nor any other Participant shall make a tied aid commitment until ten working days after thisARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified30  TAD/PG(2023)7
notification to Participants has been issued. For projects for which competing commercial offers
were identified during the consultation process, the aforementioned ten working-day period
shall be extended to 15 days.
c) The Secretariat shall monitor the progress and results of consultations.

SECTION 5: INFORMATION EXCHANGE FOR EXPORT CREDITS AND
TRADE-RELATED AID
50.

CONTACT POINTSAll communications shall be made between the designated contact points in each country by means of
instant communication, e.g. electronic mail, and shall be treated in confidence.

51.

52.

SCOPE OF ENQUIRIESa)A Participant may ask another Participant about the attitude it takes with respect to a third
country, an institution in a third country or a particular method of doing business.

b)

A Participant that has received an application for official support may address an enquiry toanother Participant, giving the most favourable credit terms and conditions that the enquiring
Participant would be willing to support.

c)

If an enquiry is made to more than one Participant, it shall contain a list of addressees.

d)

A copy of all enquiries shall be sent to the Secretariat.

SCOPE OF RESPONSESa) The Participant to which an enquiry is addressed shall respond within seven calendar days andprovide as much information as possible. The reply shall include the best indication that theParticipant can give of the decision it is likely to take. If necessary, the full reply shall follow assoon as possible. Copies shall be sent to the other addressees of the enquiry and to theSecretariat.
b) If an answer to an enquiry subsequently becomes invalid for any reason, because for example:‒ an application has been made, changed or withdrawn, or‒ other terms are being considered,a reply shall be made without delay and copied to all other addressees of the enquiry and to theSecretariat.

53.

FACE-TO-FACE CONSULTATIONSa) A Participant shall agree within ten working days to requests for face-to-face consultations.
b) A request for face-to-face consultations shall be made available to Participants andnon-Participants. The consultations shall take place as soon as possible after the expiry of theten working-day period.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  31c) The Chairman of the Participants shall co-ordinate with the Secretariat on any necessary follow
up action, e.g. a Common Line. The Secretariat shall promptly make available the outcome of
the consultation.

54.

PROCEDURES AND FORMAT OF COMMON LINESa) Common Line proposals are addressed only to the Secretariat. A proposal for a Common Lineshall be sent to all Participants and, where tied aid is involved, all DAC contact points by the
Secretariat. The identity of the initiator is not revealed on the Common Line Register on theelectronic Bulletin Board maintained by the Secretariat on the OECD Network Environment.
However, the Secretariat may orally reveal the identity of the initiator to a Participant or DAC
member on demand. The Secretariat shall keep a record of such requests.
b) The Common Line proposal shall be dated and shall be in the following format:‒ Reference number, followed by “Common Line”.
‒ Name of the importing country and buyer.
‒ Name or description of the project as precise as possible to clearly identify the project.
‒ Terms and conditions foreseen by the initiating country.
‒ Common Line proposal.
‒ Nationality and names of known competing bidders.
‒ Commercial and financial bid closing date and tender number to the extent it is known.
‒ Other relevant information, including reasons for proposing the Common Line, availabilityof studies of the project and/or special circumstances.
c) A Common Line proposal put forward in accordance with Article 32 b) 4) shall be addressed to
the Secretariat and copied to other Participants. The Participant making the Common Lineproposal shall provide a full explanation of the reasons why it considers that the classificationof a country should differ from the procedure set out in Article 32 b).
d) The Secretariat shall make publicly available the agreed Common Lines.

55.

RESPONSES TO COMMON LINE PROPOSALSa) Responses shall be made within 20 calendar days, although the Participants are encouraged torespond to a Common Line proposal as quickly as possible.
b) A response may be a request for additional information, acceptance, and rejection, a proposal
for modification of the Common Line or an alternative Common Line proposal.
c) A Participant that advises that it has no position because it has not been approached by anexporter, or by the authorities in the recipient country in case of aid for the project, shall bedeemed to have accepted the Common Line proposal.

56.

ACCEPTANCE OF COMMON LINESa) After a period of 20 calendar days, the Secretariat shall inform all Participants of the status of
the Common Line proposal. If not all Participants have accepted the Common Line, but noParticipant has rejected it, the proposal shall be left open for a further period of eight calendar
days.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified32  TAD/PG(2023)7b) After this further period, a Participant that has not explicitly rejected the Common Line proposal
shall be deemed to have accepted the Common Line. Nevertheless, a Participant, including theinitiating Participant, may make its acceptance of the Common Line conditional on the explicit
acceptance by one or more Participants.
c) If a Participant does not accept one or more elements of a Common Line it implicitly accepts
all other elements of the Common Line. It is understood that such a partial acceptance may leadother Participants to change their attitude towards a proposed Common Line. All Participants
are free to offer or match terms and conditions not covered by a Common Line.
d) A Common Line that has not been accepted may be reconsidered using the procedures in
Articles 54 and 55. In these circumstances, the Participants are not bound by their originaldecision.

57.

DISAGREEMENT ON COMMON LINES

If the initiating Participant and a Participant which has proposed a modification or alternative cannot agree
on a Common Line within the additional eight-calendar day period, this period can be extended by theirmutual consent. The Secretariat shall inform all Participants of any such extension.

58.

EFFECTIVE DATE OF COMMON LINEThe Secretariat shall inform all Participants either that the Common Line will go into effect or that it has
been rejected; the Common Line will take effect three calendar days after this announcement. The
Secretariat shall make available on the electronic bulletin board a permanently updated record of all
Common Lines that have been agreed or are undecided.

59.

VALIDITY OF COMMON LINESa) A Common Line, once agreed, shall be valid for a period of two years from its effective date,unless the Secretariat is informed that it is no longer of interest, and that this is accepted by all
Participants. A Common Line concerning a specific transaction shall remain valid for a further
two-year period if a Participant seeks an extension within 14 calendar days of the original dateof expiry. Subsequent extensions of a Common Line concerning a specific transaction or any
extension of a Common Line that is not related to a specific transaction may be agreed throughthe procedures set out in Articles 54 to 58. A Common Line agreed in accordance with
Article 32 b) 4) shall be valid until World Bank data for the following year is available.
b) The Secretariat shall monitor the status of Common Lines and shall keep the Participants
informed accordingly, through the maintenance of the listing “The Status of Valid Common
Lines” on the electronic bulletin board. Accordingly, the Secretariat, inter alia, shall:‒ Add new Common Lines when these have been accepted by the Participants.
‒ Update the expiry date when a Participant requests an extension.
‒ Delete Common Lines that have expired.
‒ Issue, on a quarterly basis, a list of Common Lines due to expire in the following quarter.
A Participant providing official support under a Common Line related to the rules concerning
export credits (i.e. that is not related to the rules concerning trade-related aid) shall give priornotification of each transaction supported according to Article 44.

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Unclassified

TAD/PG(2023)7  33

SECTION 6: REVIEWS
60.

REGULAR REVIEW OF THE ARRANGEMENTa) The Participants shall review regularly the functioning of the Arrangement. In the review, theParticipants shall examine, inter alia, notification procedures, implementation and operation of
the DDR system, rules and procedures on tied aid, questions of matching, prior commitments
and possibilities of wider participation in the Arrangement.
b) This review shall be based on information of the Participants' experience and on theirsuggestions for improving the operation and efficacy of the Arrangement. The Participants shalltake into account the objectives of the Arrangement and the prevailing economic and monetarysituation. The information and suggestions that Participants wish to put forward for this review
shall reach the Secretariat no later than 45 calendar days before the date of review.

61.

REVIEW OF MINIMUM INTEREST RATESThe Participants shall undertake a comprehensive review of the CIRR provisions set out in Annex XII by
no later than 15 July 2027.

62.

REVIEW OF MINIMUM PREMIUM RATES AND RELATED ISSUESThe Participants shall regularly monitor and review all aspects of the premium rules and procedures. This
shall include:a) The Country Risk Classification and Sovereign Risk Assessment Methodologies to review theirvalidity in the light of experience;b) The level of the MPRs to ensure that they remain an accurate measure of credit risk, taking into
account both the actual experience of institutions providing official export credits as well asprivate market information on the pricing of credit risk;c) The differentiations in the MPRs which take account of the differing quality of export credit
products and percentage of cover provided; andd) The body of experience related to the use of country risk mitigation and buyer risk credit
enhancements and the continued validity and appropriateness of their specific impact on the
MPRs.
e) A comprehensive review of all aspects of the premium rules of the Arrangement, with a special
emphasis on the Market Benchmark Pricing Rules, shall take place no later than 31 December
2024.

63.

REVIEW OF OFFICIAL SUPPORT FOR LOCAL COSTS

The Participants shall review the provisions on local costs support by no later than 20 April 2024.

64.

REVIEW OF REPAYMENT PROFILES AND TERMSThe Secretariat shall undertake a biennial comprehensive report on the repayment profiles and repayment
terms for export credits supported by Participants according to Chapter II, Annex I and Annex II, based onprior notifications and ex post reporting. The report shall comprise a statistical and qualitative analysis of
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified34  TAD/PG(2023)7
the use of repayment profile flexibilities and of the length repayment terms supported. Should the report
indicate that more than 30% of Arrangement transactions supported under Chapter II, Annex I and Annex
II used duly justified flexibilities, a mandatory review of the repayment structure parameters will be
undertaken by the Participants.

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Unclassified

TAD/PG(2023)7  35

ANNEX I: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR
CLIMATE CHANGE

The purpose of this Sector Understanding is to provide adequate financial terms and conditions to projects
in selected sectors identified including under international initiatives as significantly contributing toclimate change mitigation, including environmentally sustainable energy, greenhouse gas (GHG)
emissions’ reduction and high energy efficiency projects, climate change adaptation, as well as waterprojects. The Participants to this Sector Understanding agree that the financial terms and conditions of the
Sector Understanding, which complements the Arrangement, shall be implemented in a way that is
consistent with the Purpose of the Arrangement.

CHAPTER I: SCOPE OF THE SECTOR UNDERSTANDING

1.

SCOPE OF APPLICATION FOR PROJECTS IN CLIMATE CHANGEMITIGATION SECTORS ELIGIBLE FOR SUPPORT UNDER APPENDIX Ia) This Sector Understanding sets out the financial terms and conditions that apply to officially
supported export credits relating to contracts in the eligible sectors listed and defined inAppendix I of this Sector Understanding, provided that their impacts are addressed, like all
officially supported export credits, in accordance with the 2012 Recommendation of the Council
on Common Approaches on Officially Supported Export Credits and Environmental and Social
Due Diligence. This list of sectors and, when applicable, the corresponding technology-neutral
performance criteria used to define a project’s eligibility, may be modified over time inaccordance with the review provisions set out in Article 8 of this Sector Understanding.
b) Such contracts shall relate to the export of complete projects or parts thereof, comprising allcomponents, equipment, materials and services (including the training of personnel) directly
required for the construction and commissioning of an identifiable project, providing that:1)

The project results in low to zero carbon emissions, or CO2 equivalent, and/or in highenergy efficiency;

2)

The project should be designed to meet, as a minimum, the performance standards as set
out in Appendix I; and3)

The terms and conditions provided shall be extended only to address specific financial
disadvantages encountered by a project, and shall be based on the individual financial needs
and specific market conditions of each project.

c) The terms and conditions that apply for the sectors listed in Project Class A of Appendix I are
limited to:1) The export of complete environmentally sustainable energy power plants or parts thereof,
comprising all components, equipment, materials and services (including the training of
personnel) directly required for the construction and commissioning of such plants.
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2) The modernisation of existing environmentally sustainable energy power plants in cases
where the economic life of the plant is likely to be extended by at least the repayment period
to be awarded. If this criterion is not met, the terms of Chapter II of the Arrangement apply.
d) The terms and conditions that apply for the sectors listed in Project Class A of Appendix I do
not apply to items located outside the power plant site boundary for which the buyer is usually
responsible, in particular, water supply not directly linked to the power production plant, costs
associated with land development, roads, construction villages, power lines and switchyard, as
well as costs arising in the buyer’s country from official approval procedures (e.g. site permits,
construction permit), except:
1) To the extent to which the items fall under Appendix I or II.
2) In cases where the buyer of the switchyard is the same as the buyer of the power plant andthe contract is concluded in relation to the original switchyard for that plant, the terms andconditions for the original switchyard shall not exceed those for the plant; and
3) The terms and conditions for sub-stations, transformers and transmission lines with aminimum voltage threshold of 60kV located outside the power plant site boundary shall not
be more generous than those for the power plant.
e) Participants may propose to provide the financial terms and conditions set out in this Sector
Understanding for climate change mitigation projects that are not currently in Appendix I orotherwise do not meet the eligibility criteria in Appendix I. These projects will be consideredon a case-by-case basis according to the procedure outlined in Article 54-59 of the Arrangement.
Participants will favourably consider proposals that are aligned with shared climate objectives
and the purpose of this Sector Understanding.

2.

SCOPE OF APPLICATION FOR CLIMATE CHANGE ADAPTATIONPROJECTS ELIGIBLE FOR SUPPORT UNDER APPENDIX IIa) This Sector Understanding sets out the financial terms and conditions that apply to officially
supported export credits relating to contracts or projects that meet the criteria set out inAppendix II of this Sector Understanding.
b) Such contracts shall relate to the export of complete projects or parts thereof, comprising allcomponents, equipment, materials and services (including the training of personnel) directly
required for the execution and commissioning of an identifiable project, providing that:
1) The conditions set out in Appendix II are met; and
2) The terms and conditions provided shall be extended only to address specific financial
disadvantages encountered by a project, and shall be based on the individual financial needs
and specific market conditions of each project.
c) This Sector Understanding also applies to the modernisation of existing projects, to take into
consideration adaptation concerns, in cases where the economic life of the project is likely to beextended by at least the repayment period to be awarded. If this criterion is not met, the termsof the Arrangement apply.

3.

SCOPE OF APPLICATION FOR WATER PROJECTSThis Sector Understanding sets out the financial terms and conditions that apply to officially supported
export credits relating to contracts for the export of complete projects or parts thereof related to the supplyof water for human use and wastewater treatment facilities:

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Unclassified

TAD/PG(2023)7  37a) Infrastructure for the supply of drinking water to municipalities, including to households andsmall businesses, i.e. water purification for the purpose of obtaining drinking water anddistribution network (including leakage control).
b) Wastewater collection and treatment facilities, i.e. collection and treatment of household andindustrial wastewater and sewage, including processes for the re-use or recycling of water andthe treatment of sludge directly associated with these activities.
c) The modernisation of such facilities in cases where the economic life of the plant is likely to beextended by at least the repayment period to be awarded. If this criterion is not met, theprovisions of the Arrangement apply.

CHAPTER II: PROVISIONS FOR EXPORT CREDITS
4.

MAXIMUM REPAYMENT TERMSa) The maximum repayment term for climate change mitigation transactions eligible to besupported under Article 1 of this Sector Understanding is set out in Appendix I.
b) The maximum repayment term for climate change adaptation transactions eligible to besupported under Article 2 of this Understanding and according to the eligibility criteria in
Appendix II is 22 years.
c) The maximum repayment term for water transactions eligible to be supported under Article 3 ofthis Understanding is 22 years.

5.

REPAYMENT OF PRINCIPAL AND PAYMENT OF INTERESTa) The principal sum of an export credit shall normally be repaid in equal and regular instalmentsor, when appropriate (e.g. when support is provided for lease transactions or for the export ofstand-alone machinery or equipment), equal repayments of principal and interest combined.
b) Principal shall be paid no less frequently than annually and the first instalment of principal shallbe made no later than one year after the starting point of credit.
c) Interest shall be paid no less frequently than every six months and the first payment of interest
shall be made no later than six months after the starting point of credit. In the case of annual
repayments of principal, interest shall be paid no less frequently than every twelve months andthe first payment of interest shall be made no later than twelve months after the starting point ofcredit.
d) Interest due after the starting point of credit shall not be capitalised.
e) When duly justified by an imbalance between the timing of the funds available to the obligor
and the debt service profile possible according to the parameters set out in paragraphs a) and b)
above, export credits supported under this Understanding may be provided within the following
constraints:
1) For transactions eligible to be supported under this understanding that are subject to a
maximum repayment term of 15 years and transactions supported under project class B
Type 1:‒ No single repayment of principal or series of principal payments within a six-month
period shall exceed 30% of the principal sum of the credit.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified38  TAD/PG(2023)7‒ The first repayment of principal shall be made no later than 24 months after the starting
point of credit.
‒ The maximum weighted average life of the repayment period is the greater of 65% of
the repayment term of the transaction or six years.
2) For all other transactions eligible to be supported under this understanding:‒ No single repayment of principal or series of principal payments within a six-month
period shall exceed 35% of the principal sum of the credit.
‒ The first repayment of principal shall be made no later than 36 months after the starting
point of credit.
‒ The maximum weighted average life of the repayment period is the greater of 70% of
the repayment term of the transaction or six years.

CHAPTER III: PROCEDURES6.

PRIOR NOTIFICATIONa) A Participant intending to provide support in accordance with the provisions of this Sector
Understanding, shall give prior notification at least ten calendar days before issuing any
commitment with a credit value of more than SDR ten million, in accordance with:
1) Article 44 of the Arrangement if the support is extended pursuant to Article 1 or 3 of this
Sector Understanding;2) Article 43 of the Arrangement if the support is extended pursuant to Article 2 of this Sector
Understanding.
b) Such notifications shall include an enhanced description of the project in order to demonstrate
how the project complies with the criteria for support, as set out in Article 1 or 2 of this Sector
Understanding.
c) For projects supported in conformity with Appendix I of this Sector Understanding, such
notification shall include information on the technical or performance standards that are being
applied, and, where available, the expected emissions reductions.
d) For projects supported in conformity with Appendix II of this Sector Understanding, such
notification shall include the outcome of any independent third-party review, if applicable.
e) For transactions that have been supported under Article 5 e) above, Participants shall, inter alia,
provide:1) detailed information on the repayment profile supported and an explanation of the reasons
why there is an imbalance between the timing of funds available to the obligor and the debt
service profile available if supported according to Articles 5 a) and 5 b), and2) for transactions with a repayment profile that does not match the free cash flow, a detailed
and adequate justification of the repayment profile supported.
f) A Participant shall inform all other Participants of its final decision following a discussion, tofacilitate the review of the body of experience.

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TAD/PG(2023)7  39

CHAPTER IV: MONITORING AND REVIEW
7.

FUTURE WORKThe Participants agree to examine the following issues:a) Net zero energy buildings.
b) Fuel cell projects.
c) Clean gaseous and liquid fuels.
d) Review and inclusion of future international standards for low emissions manufacturing (forexample, by the IEA).

8.

MONITORING AND REVIEWa) The Secretariat shall report annually on the implementation of this Sector Understanding. This
report will document the outcomes of any discussion procedure under Article 43 of the
Arrangement. It will include a summary for public release.
b) The Participants shall regularly review the scope and other provisions of this Sector
Understanding. For added certainty, a review will take place by the end of 2028 or once 150
CCSU transactions have taken place after 15 July 2023, whichever happens first. This review
will be based on the body of experience developed from the notification process (including
information on technical or performance standards applied and, where available, emissions
reductions achieved), the most recent reports on climate science, and an assessment of market
conditions for climate-related technologies.
c) If a Participant is concerned that a provision or provisions in this Sector Understanding are nolonger operating consistently with the purpose of the Arrangement, as set out in Article 1(Purpose) of the Arrangement, that Participant can request the matter be considered at the nextscheduled meeting of the Participants and should provide evidence of their concern.
d) Appendix I of this Sector Understanding shall be reviewed at regular intervals, including upon
the request of a Participant, with the view to assessing whether any Project Class and/or Typeshould be added to, or removed from, or whether any thresholds should be changed in, that
Appendix. Proposals for new Project Classes and/or Types shall be supported by information
on how projects within such a Class/Type should fulfil the criteria set out in Article 1 of this
Sector Understanding.

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APPENDIX I:ELIGIBILITY CRITERIA FOR CLIMATE CHANGE MITIGATIONPROJECTS

The definitions or standards referenced below are intended to promote a common understanding among
Participants regarding the implementation of this Sector Understanding for the corresponding projecttypes. They do not prejudice other climate-related definitions or standards that already exist or are underdevelopment or are to be developed.

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TAD/PG(2023)7  41

PROJECT CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS A: Environmentally sustainable energy production
TYPE 1: Renewable
EnergyComplete plants or parts thereof, and themodernisation of existing plants, in the
below sectors:

22 yearsa) Wind energy.
b) Geothermal energy.
c) Tidal and tidal stream power.
d) Wave power.
e) Osmotic power.
f) Solar photovoltaic power.
g) Solar thermal energy.
h) Ocean thermal energy.
i) Bioenergy: all sustainable landfill gas,
sewage treatment plant gas, biogas
energy or fuel derived from biomassenergy installations. “Biomass” shallmean the biodegradable fraction of
products, waste and residues fromagriculture (including vegetal and animal
substances), forestry and relatedindustries, as well as the biodegradable
fraction of industrial and municipal
waste.
j) Hydro power.
k) Energy efficiency in Renewable
Energies projects.
TYPE 2: Electricity
Production from
Clean Hydrogen

Construction of electricity generation
facilities that produce electricity using
exclusively clean hydrogen.

For clean hydrogen standards, see
PROJECT CLASS F, TYPE 1.

Seerepayment
terms of
Project
Class F,
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PROJECT CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS B: Remediation projects in fossil fuel plants, fossil fuel substitution
TYPE 1: Fossil
Fuel Power
Plants withOperational
Carbon Captureand Storage(CCS)*A process consisting of theseparation of CO2 stream from theemissions produced by fossil fuelgeneration sources, transport to a
storage site, for the purposes ofenvironmentally safe andpermanent geological storage of
CO2 or use as an input or
feedstock to create products orservices.

To achieve low carbon
emission levels for fossil fuelpower sources.

Carbon intensity shall achieve a level equal toor less than 350 metric ton CO2 per GWhvented to atmosphere1;

18 yearsor
In the case of all projects, a capture andstorage rate that would reduce the plant’s
carbon emissions by 65% or greater;or
The capture rate has to be at least 85% of
CO2 emitted by the equipment included in theapplication for officially supported export
credits. The 85% is to apply at normal
operating conditions.

TYPE 2: Waste to
Energy*TYPE 3: Hybrid
Power Plants*

Unit dedicated to generatingenergy by thermal treatment(including gasification) of mixed
stream solid waste.

A power plant that generates
electric power from both arenewable energy source and afossil fuel source.

To offset GHG emissions fromthe use of conventional powerand by reducing future GHG
such as methane that would
normally emanate from thewaste.

In the case of a steam cycle, a boiler (orsteam generator) energy conversion
efficiency of at least 75% based on low
heating value (LHV).2

To meet the requirement ofplant availability, a fossil fuelgenerating source is required
for those periods when powerfrom the renewable energy
source is not available orsufficient. The fossil fuelsource enables the usage of
renewable energy in the hybrid
plant, thereby achieving asignificant carbon reduction
compared with standard fossil
fuel plant.

Model 1:15 years

In the case of gasification, a gasifier efficiency
of at least 65% LHV.3
15 years

Two separate generation sources: one
Renewable Energy and one fossil fuel.
Project shall be designed such that at least
50% of its projected total annual energy
output originates from the plant’s renewableenergy source.
Model 2:Single generation source using the
combination of renewable and fossil fuel. The
project shall be designed such that at least
75% of the useful energy produced is derived
from the renewable source.

Note: * In an effort to respond to the climate imperative, Participants have focused their effort on expanding the scope of the
CCSU to include new project classes. Participants commit to reviewing these project classes, which have not been examined since2012, as soon as possible but no later than March 2024.

1

In the case of a plant fuelled by natural gas, significantly lower carbon intensity is expected to be achieved.

2

Boiler (or steam generator) energy conversion efficiency = (Net heat exported by the steam / heat or calorificvalue [LHV] provided by the fuel) (x 100%).
3

Gasifier efficiency = (Calorific value of gas per kg of fuel used / average net calorific value (LHV) of one kg
of fuel) (x 100%).

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TAD/PG(2023)7  43

PROJECT CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS C: Energy efficiency
TYPE 1: Combined
Heat & Powerprojects*

Simultaneous generation ofmultiple forms of energy (electrical,
mechanical and thermal) in a single
integrated system.
Output of the CHP plant shall
include electric or mechanicalenergy and heat for commercial
industrial and/or residential use.

TYPE 2: District
heating and/or
cooling*

Network which carries/ distributes
thermal energy from energy
producing unit to end use.

Up to two thirds of the primaryenergy used to generate
electricity in conventional
thermal power plants is lost in
the form of heat. Combined
heat and power (CHP)
generation can therefore bean effective GHG mitigation
option. CHP is possible with allheat machines and fuels(including biomass and solar
thermal) from a few kW-rated
to 1000MW steam-condensing
power plants.4

Overall efficiency of at least 75% based on
low heating value (LHV).5

15 years

To improve the efficiency ofheating of districts by building
piping networks for steam
and/or hot water with
substantial thermal efficiency,
both by minimising losses ofpiping and converters, and byincreasing the amount ofutilisation of waste heat.

The district piping thermal conductivity shallbe less than 80% of the relevant thermal
conductivity required by the European
standard EN253:2009 (to be reviewed when
this standard is updated).

15 years

District cooling is an
integrative technology that canmake significant contributions
to reducing emissions ofcarbon dioxide and air
pollution and to increasingenergy security e.g. via
substitution of individual air
conditioners.

Note: * In an effort to respond to the climate imperative, Participants have focused their effort on expanding the scope of the
CCSU to include new project classes. Participants commit to reviewing these project classes, which have not been examined since2012, as soon as possible but no later than March 2024.

4

IPCC Fourth Assessment Report: Climate Change 2007, http://www.ipcc.ch/publications_and_data/ar4/wg3/en/ch4s4-3-5.html.
5

The total system efficiency ( o) of a CHP system is the sum of the net useful power output (W E) and net
useful thermal outputs (ΣQTH) divided by the total fuel input (QFUEL), as shown below:

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PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINETo enable network operators,
transmission and distribution
system operators, grid users,
storage owners, metering
operators, applications andservice providers or power
exchange platform operators tocreate economical,
environmentally-friendly,
balanced and sustainable powersystems with reduced
transmission losses andoptimized levels of supply
quality, safety, grid stability,
reliability, renewable powercollection and cost-efficiency bysupporting supply contracts
involving predominantly export ofstate-of-the-art, innovativetechnologies and services.

Standards 1, 2 (a or b) and 3 shall be met.

MAXIMUM
REPAYMENTTERM

PROJECT CLASS C: Energy efficiency (continued)
TYPE 3: Smart
Grids*

Integrated, technologicallyadvanced electricity networks
with improved dynamic
capabilities to monitor and control
the input and output of all theirconstituent technical components(such as power generation,
Network Management Solutions,High Voltage Direct Current(HVDC) converters and systems,
Flexible Alternating Current
Transmission Systems (FACTS),
Special Power Systems (SPS),
transmission, distribution,
storage, Smart Grid PowerElectronics Solutions,consumption reduction, metering,
distributed energy resources).
ICT according to internationallyagreed industry standards such
as NIST-SGIP and ETSI-CENCENELEC.

15 years

1. The total cost of the project includes atleast 20% for eligible information andcommunication technology (ICT) upgrades.
2a. An estimated minimum 10% reduction in
the amount of CO2 emissions from fossil fuelwill result from the project or application, or
2b. Demonstrated significant CO2 emission
reductions will be enabled through either:• reductions in energy losses within theelectricity grid served by the Smart Grid
application or project by at least 5%; or• reductions in aggregate electricity
consumption by loads served by the Smart
Grid application or project by at least 5%;or• intermittent feed-in of renewable energies,
including from subordinate voltage levels,
representing at least an additional 10% of
the total energy fed into the grid where thesmart grid technologies are applied.
3. Prior to authorization, an independent,
qualified third party will review the projectand prepare a report that describes thecharacteristics of the proposed Smart Grid
application or project and verifies whether
the project or application will meet standards
1 and 2 (a or b). For projects using the 2bstandard, estimated C02 emissions
reductions enabled by the project will be
included in the report. Such report will beshared with Participants prior to any
authorization of financial support andauthorization will be conditional on the report
positively verifying that standards 1 and 2 (aor b) will be met by the proposed Smart Grid
project or application.
Standards will be measured by comparing
the estimated emissions or energy use froman Area Served by the Grid if the proposed
Smart Grid technologies are applied toemissions or energy use of that same area if
the proposed Smart Grid technologies were
not applied.

Note: * In an effort to respond to the climate imperative, Participants have focused their effort on expanding the scope of the
CCSU to include new project classes. Participants commit to reviewing these project classes, which have not been examined since2012, as soon as possible but no later than March 2024.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified

TAD/PG(2023)7  45

PROJECT CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS D: Carbon capture, utilisation, and storage (CCUS) projects
Construction and operation offacilities that are dedicated toeither:To significantly reduce carbon
emissions from existingsources.

• Capturing CO2 fromemissions sources thatwould otherwise be released
into the atmosphere, or
capturing CO2 from theambient air;
• Preparing the captured CO2
for transportation (viapipeline, rail, road, or ship),which includes preparationof captured CO2 totransportation specification(e.g., compression);

At a minimum, ambient air capture facilities must
capture the CO2 equivalent of their own operationalemissions.

22 years

Dedicated geological storage complies with ISO
27914:2017.
Eligible utilisation of the captured and/or transported
CO2 is covered under Clean Liquid and GaseousFuels (PROJECT CLASS J) and Low-Emission
Manufacturing (PROJECT CLASS G).
Utilization of CO2 for fossil fuel related activities suchas enhanced oil recovery is not eligible.
Appropriate leak detection systems and monitoringplans are in place for transportation and storage ofCO2, with regular reports verified by the national
authorities or an independent third party.

• Transporting the captured
CO2 to the end use point; or,• Permanently storing
captured CO2.

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46  TAD/PG(2023)7

PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS E: Transmission, distribution, and storage of energy
TYPE 1: Energy
Management,
Transmission,and Distribution

Construction and/or expansionof grid-scale energy storage
facilities (e.g., chemical,
thermal, mechanical, andelectrochemical).

To facilitate long-term, costeffective decarbonization of
power systems.

Projects related to low-carbon electricity are eligible
where low-carbon electricity comprises more than
60% of the newly installed generation capacity over
the trailing 5-year period.

22 years

Low-carbon electricity refers to any power source
listed in Project Class A of this Appendix, or where
GHG emissions from the electricity produced is
below the threshold value of 133 gCO2e/kWh.

Construction and expansion of
infrastructure that transports
low carbon electricity,
including direct connections to
low carbon sources andnetworks sections where theelectricity mix meets thestandards.

Given that the electrification in the low and lower
middle-income countries is critical todecarbonization, the above standard shall not apply
for projects in these countries until 5 years after theeffective date of this Agreement, unless Participants
agree otherwise. Such projects are subject to
Article 43.

Installation of smart-meters
and other technologies that
improve grid efficiency.

Construction and expansion of infrastructure
projects that transports electricity are eligible so longas they are not directly connecting fossil fuel power
plants to the grid.
Grid efficiency project documents must credibly
demonstrate that energy efficiency is the primary
purpose of the project.

TYPE 2: Battery
Production andRecycling

Construction of facilities that
manufacture rechargeable
batteries, battery packs, andbattery cells with climatemitigating end uses (e.g., forutility, transport, and industrial
applications).

To increase output ofclimate-mitigating batteries
and facilitate the costeffective decarbonization ofhigh-emission activities.

Project description in notification to include
description of the end use of the battery.

22 years

Recycling of end-of-lifebatteries.

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TAD/PG(2023)7  47

PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS F: Clean hydrogen and ammonia
TYPE 1: Clean
Hydrogen
Production

Construction of facilities
dedicated to clean hydrogenproduction.

To facilitate thedecarbonization of highemission sectors.

Clean hydrogen projects are eligible where:
i. Hydrogen has well-to-gate emissions (fromfeedstock production until hydrogenshipment) that are less than 3 kg CO2e per
1 kg of H2 (tier 1);

Tier 1:
22 yearsTier 2:18 yearsii. Hydrogen has well-to-gate emissions (fromfeedstock production until hydrogenshipment) that are less than 4 kg CO2e per
1 kg of H2 (tier 2).
TYPE 2: Clean
Ammonia
Production

Construction of facilities
dedicated to clean ammonia
production.

To facilitate thedecarbonization ofhigh-emission sectors.

Clean ammonia is ammonia produced fromclean hydrogen according to the standards
defined in this Appendix or that is recoveredfrom wastewater. The thresholds for cleanammonia correspond to the thresholds for cleanhydrogen used in its production. There are no
thresholds for clean ammonia recovered fromwastewater,

Tier 1 andcleanammonia
recoveredfromwastewater:
22 yearsTier 2;18 years
TYPE 3:
Transmission,
Distribution,and Storage of
HydrogenConstruction of storage,transmission, and distribution
facilities that are connected toclean hydrogen production
plants or are expected to beconnected to such plants
within five years.
Conversion of existing gas
facilities into 100% hydrogenfacilities.
Repurposing of gas networks
that enables the integration ofhydrogen.

To develop the infrastructureneeded to transmit,
distribute, and store cleanhydrogen, recognizing thatclean hydrogen will use thesame transmission,
distribution, and storage
facilities as other hydrogen,and further recognizing thatclean hydrogen uptake
necessitates thedevelopment of infrastructure
for use by all hydrogentypes.

Where applicable, refer to clean hydrogenstandards in PROJECT CLASS F, TYPE 1.

22 years

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PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINE

To incentivize manufacturers tomove toward sustainable
practices in hard-to-abate
sectors with the aim, particularly
in manufacturing sectors
experiencing global oversupply,
to support the substitution of
GHG intensive technologies withtechnologies significantly
contributing to climate change
mitigation.

Prior to consensus on appropriate standards at
the future review by the Participants, Participants
must use the common line procedures outlined in
Articles 54-59 of the Arrangement to submit a
proposal for a low-emissions manufacturing
project. The proposal shall include the GHG
intensity of the production of the manufactured
product, calculated in compliance with the GHG
Reporting Protocol, taking into account Scope 1
and 2 emissions. The proposal shall present a
rationale for why this level qualifies as low
emissions. This information must be supported bydocuments which will be filed with the proposal.

MAXIMUM
REPAYMENTTERM

PROJECT CLASS G: Low emissions manufacturing6
Low emissions manufacturing
including construction,
expansion, or retrofitting ofcomplete manufacturing plants
and part thereof, supplies ofequipment, and directly
associated infrastructure andservices.
Illustrative list:a) Ferrous and non-ferrous
metalsb) Cementc) Chemicals (incl. fertilizer,
ammonia)d) Pulp & Paper

22 years

For projects relating to contracts of a value of atleast SDR 20 million, there shall be an
independent third-party review conducted on the
project, either separately or conducted in concert
with the preparation of the project documents.
This above-mentioned documentation shall be
published in standardized form on the OECD
website at the date of the first draw-down (takeinspiration from the ECG project Class A projecttransparency).

6

After 30 June 2024, this project type shall be discontinued unless Participants agree otherwise. At the sametime, Participants will review international standards developed by then and decide whether they will incorporate themin this entry.

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PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINE

The transition to zero direct
tailpipe emissions fleets is key inachieving climate change
mitigation.

Direct tailpipe CO2 emissions of the moving
assets are zero.

MAXIMUM
REPAYMENTTERM

PROJECT CLASS H: Zero and low emissions transport
TYPE 1: Zeroemissionstransport andenabling
infrastructure7

Zero direct emissions fleets
including vehicles for road,track-bound transportation
systems,8 and water transport
and associated infrastructure
essential to operating suchvehicles.9

Zero-emission vehicles include electricvehicles and fuel cell vehicles.
Freight transport, including vehicles, train,wagons or vessels and infrastructure essential
to operating such vehicles must not be
dedicated to the transport or storage of fossil
fuels.

22 years for
all transportand enabling
infrastructure
save vessels

18 years forvessels

For associated infrastructure, project
notification shall include description of the link
between zero emissions vehicles and theinfrastructure, including how it is essential tooperating such vehicles.
In order to obtain repayment terms longer than
18 years for vessels, Participants must use thecommon line procedures outlined in Articles
54-59 of the Arrangement. The proposal mustjustify why longer repayment terms areneeded. The maximum repayment terms shallnot exceed 22 years.
TYPE 2: Low
emissions rail andenabling
infrastructure

Low emissions rail transport,
including bi-mode electrodiesel trains and hybrid
locomotives and associatedinfrastructure essential tooperating such vehicles.

To incentivize hybrid and low
emissions rail transport where
its usage will achieve significant
emissions reductions andcontribute to climate change
mitigation.

In the case of bi-mode trains, trains,
passenger coaches and wagons have zero
direct tailpipe CO2 emission when operated ona track with necessary infrastructure and use aconventional engine where such infrastructure
is not available (bi-mode trains).

20 years

TYPE 3: Low
emissionsheavy-dutytransport andenabling
infrastructure

Plug-in hybrid vehicles(PHEV) for industrial or freight
applications and associatedinfrastructure essential tooperating such vehicles.

To incentivize hybrid and low
emissions vehicles where theirusage will achieve significant
emissions reductions andcontribute to climate change
mitigation.

For PHEV, the vehicle has zero direct tailpipe
CO2 emissions when operated using anelectric motor and otherwise uses a
conventional engine.

20 years for
PHEV

Hybrid electric vehicles (HEV)
for industrial or freight
applications.

18 years for
HEV

For HEV, the vehicle achieves 35% reduction
in direct tailpipe CO2 emissions or 35%
increase in energy efficiency compared tocorresponding conventional vehicles in thenewest model year.

7

Vessels shall be excluded from this project type as from three years after its entry into force, unlessParticipants agree otherwise.
8

The specific types of track-bound transportation systems that are eligible for support according to the terms
and conditions of this Appendix are: 1) Any type of rail transportation system. 2) Trolleybus transportation systems.
3) Cable car transportation systems. Cable car transportation systems associated with recreational activities such as
skiing are not eligible for support under this Appendix.
9

Illustrative list for associated infrastructure: control (signalling and other IT) systems, electrification, tracks,
overhead wires and cables, pylons, battery charging infrastructure, hydrogen refuelling infrastructure, and related
construction work.

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PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS H: Zero and low emissions transport (continued)
TYPE 4: Low
emissions watertransport

Transactions falling under this project class remain subject to the terms and conditions of Chapter II pending the outcome of further
discussions by the Participants regarding the specific criteria, standards and definitions to be applied.

PROJECT CLASS I: Clean Energy Minerals and Ores10
Construction of facilities
involved in the land-based
extraction, recycling,processing, and/or refining(including metallisation) ofores or minerals where theproduct resulting from theseprocesses form part of the
supply chain for eligible
projects (or eligible parts
thereof) under Appendix I,
Class A – Type 1: Renewable
Energy; Class E – Type 2:
Battery Production andRecycling.
Illustrative List:• Copper• Cobalt• Nickel• Lithium• Rare Earth Element (REEs)• Chromium• Zinc• Platinum Group Metals(PGMs)• Aluminium

To ensure a stable andaffordable supply ofmaterials in the supply chain
for eligible projects or parts
thereof) under this Appendix
that are key to achieving
climate change mitigation.

Prior to the development of appropriate standards
that Participants will review as part of their future
work, Participants will use the common line
procedures outlined in Articles 54-59 of the
Arrangement to submit a proposal for a clean energy
minerals and ores project. This information will besupported by documents which will be filed with theproposal.

22 years

For projects for extraction, processing and refining ofores or minerals, the proposal shall include the GHG
intensity of the output product, calculated incompliance with the GHG Reporting Protocol, taking
into account scope 1 and 2 emissions. It shall also
include information on what measures have beentaken to reduce emissions. For extraction projects,
the proposal will include a disclosure of theeconomic life of the mineral reserve, estimated inaccordance with internationally recognized andaccepted guidelines in the mining industry andrelated rationale for the tenor applied.
The proposal will further include a description
demonstrating evidence that:‒ a significant proportion of offtake from the facility
will form part of the supply chain for eligible
projects (or eligible parts thereof) under Appendix
I, Class A – Type 1: Renewable Energy; Class E– Type 2: Battery Production and Recycling; or‒ there is in place a legally enforceable undertaking
requiring that a significant proportion of offtake
will be used as part of the supply chain for eligible
projects (or eligible parts thereof) under Appendix
I, Class A – Type 1: Renewable Energy; Class E– Type 2: Battery Production and Recycling; or

10

After 30 June 2024, this project class shall be discontinued unless Participants agree otherwise. At the sametime, Participants will review international standards developed by then and decide whether they will incorporate
them in this entry. A Participant may submit a proposal under this Project Class up until 30 June 2025, provided that
Participant notifies other Participants by 30 June 2024 that they are preparing to bring forward a specific proposal.

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PROJECT
CLASSDEFINITIONRATIONALE

STANDARDS USED OR SUNSET TIMELINEMAXIMUM
REPAYMENTTERM

PROJECT CLASS I: Clean Energy Minerals and Ores11 (continued)‒ the project clearly contributes to the increased
supply of minerals or ores that are internationallyrecognised as essential components to renewableenergy, including eligible projects (or eligible parts
thereof) under Appendix I, Class A - Type 1:
Renewable Energy; Class E -Type 2 Battery
Production and Recycling, and where total
demand for such minerals or ores is predicted torise significantly over the next two decades in a
scenario that meets Paris Agreement goals.
If the Participants accept the proposal, the project will
be reported in standardized form on the OECD
website at the date of first draw-down.
PROJECT CLASS J: Production of clean liquid and gaseous fuels
Transactions falling under this project class remain subject to the terms and conditions of Chapter II pending the outcome of further
discussions by the Participants regarding the specific criteria, standards and definitions to be applied.

11

After 30 June 2024, this project class shall be discontinued unless Participants agree otherwise. At the sametime, Participants will review international standards developed by then and decide whether they will incorporate
them in this entry. A Participant may submit a proposal under this Project Class up until 30 June 2025, provided that
Participant notifies other Participants by 30 June 2024 that they are preparing to bring forward a specific proposal.

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APPENDIX II:ELIGIBILITY CRITERIA FOR CLIMATE CHANGE
ADAPTATION PROJECTS

A project is eligible for the maximum financial terms and conditions set out in this Sector Understanding
if:a) The project reduces the location-specific context of vulnerability to climate change. This
reduction is explicitly indicated and explained in the project documents through an explicit
statement of intent to address the identified climate vulnerability and an analysis that articulatesa clear and direct link between the climate vulnerability context and the specific project
adaptation activities that address the climate vulnerability. Those specific project activities
define the share of the project that directly addresses climate change vulnerability. If climatechange adaptation is an objective of specific project activities, only those activities are eligible.
If climate change adaptation is an objective of the full project, or it is not technically feasible todisaggregate between adaptation and non-adaptation project activities, then the full project isconsidered to directly address climate change vulnerabilities and is eligible.
b) For projects relating to contracts of a value of at least SDR 20 million, there is an independent
third-party review conducted on the project, either separately or conducted in concert with the
preparation of the project documents. The review is publicly available, such as published on the
project website or the website of the relevant public body. The review shall verify the rationale
established in paragraph a. above. Additionally, for projects relating to contracts where it is nottechnically feasible to disaggregate among climate change adaptation and non-adaptation
project activities, the review shall verify the technical infeasibility of disaggregating projectcomponents.
c) The useful life of the project exceeds the repayment term.

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ANNEX II: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR
NUCLEAR POWER PLANTS

CHAPTER I: SCOPE OF THE SECTOR UNDERSTANDING
1.

SCOPE OF APPLICATIONa) This Sector Understanding sets out the provisions which apply to officially supported export
credits relating to contracts for:1) The export of complete nuclear power plants or parts thereof, comprising all components,
equipment, materials and services, including the training of personnel directly required forthe construction and commissioning of such plants.
2) The modernisation of existing nuclear power plants.
3) The supply of nuclear fuel and enrichment.
4) The provision of spent fuel management.
b) This Sector Understanding does not apply to:1) Items located outside the nuclear power plant site boundary for which the buyer is usually
responsible, in particular costs associated with land development, roads, construction
village, power lines, switchyard1 and water supply, as well as costs arising in the buyer's
country from official approval procedures (e.g. site permit, construction permit, fuel loading
permit).
2) Sub-stations, transformers and transmission lines located outside the nuclear power plantsite boundary.
3) Official support provided for the decommissioning of a nuclear power plant.

CHAPTER II: PROVISIONS FOR EXPORT CREDITS
2.

MAXIMUM REPAYMENT TERMSa) The maximum repayment term for goods and services covered by Article 1 a) 1) of this Sector
Understanding is 22 years.
b) The maximum repayment term for goods and services covered by Article 1 a) 2) of this Sector
Understanding, where both the overall value of the modernisation is at or above SDR 80 million

1

However, in cases where the buyer of the switchyard is the same as the buyer of the power plant and thecontract is concluded in relation to the original switchyard for that power plant, the terms and conditions for theoriginal switchyard shall not be more generous than those for the nuclear power plant.

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and the economic life of the plant is likely to be extended by at least the repayment period to beawarded is 22 years. The maximum repayment term for all other transactions covered by
Article 1 a) 2) of this Sector Understanding is 15 years.
c) The maximum repayment term for the initial fuel load is four years from delivery. The maximum
repayment term for subsequent reloads of nuclear fuel is two years from delivery.
d) The maximum repayment term for spent fuel disposal is two years.
e) The maximum repayment term for enrichment and spent fuel management is five years.

3.

REPAYMENT OF PRINCIPAL AND PAYMENT OF INTERESTa) The principal sum of an export credit shall normally be repaid in equal and regular instalmentsor, when appropriate (e.g. when support is provided for lease transactions or for the export ofstand-alone machinery or equipment), equal repayments of principal and interest combined.
b) Principal shall be repaid no less frequently than annually and the first instalment of principal
shall be made no later than one year after the starting point of credit.
c) Interest shall be paid no less frequently than every six months and the first payment of interest
shall be made no later than six months after the starting point of credit. In the case of annual
repayments of principal, interest shall be paid no less frequently than every twelve months andthe first payment of interest shall be made no later than twelve months after the starting point ofcredit.
d) Interest due after the starting point of credit shall not be capitalised.
e) When duly justified by an imbalance between the timing of the funds available to the obligor
and the debt service profile permitted according to the parameters set out in paragraphs a) andb) above, export credits supported under this Understanding may be provided within thefollowing constraints:
1) No single repayment of principal or series of principal payments within a six-month period
shall exceed 35% of the principal sum of the credit.
2) The first repayment of principal shall be made no later than 36 months after the starting
point of credit.
3) The maximum weighted average life of the repayment period is the greater of 70% of therepayment term of the transaction or six years.

4.

OFFICIAL SUPPORT FOR NUCLEAR FUEL AND FOR NUCLEAR FUELRELATED SERVICES

Without prejudice to the provisions of Article 5 of this Sector Understanding, the Participants shall notprovide free nuclear fuel or services.

5.

AID

The Participants shall not provide aid support.

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TAD/PG(2023)7  55

CHAPTER III: PROCEDURES6.

PRIOR NOTIFICATIONa) A Participant shall give prior notification in accordance with Article 44 of the Arrangement atleast ten calendar days before issuing any commitment with a credit value of more thanSDR 10 million if it intends to provide support in accordance with the provisions of this Sector
Understanding. For transactions that have been supported under Article 3 e) above, Participants
shall, inter alia, provide:1) detailed information on the repayment profile supported and an explanation of the reasons
why there is an imbalance between the timing of funds available to the obligor and the debt
service profile available if supported according to Articles 3 a) and 3 b), and2) for transactions with a repayment profile that does not match the free cash flow, a detailed
and adequate justification of the repayment profile supported.
b) A Participant shall inform all other Participants of its final decision following a discussion, tofacilitate the review of the body of experience.

CHAPTER IV: REVIEW
7.

REVIEW AND MONITORING

The Participants shall review regularly the provisions of the Sector Understanding and at the latest by theend of 2023.

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ANNEX III: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR
CIVIL AIRCRAFT

PART 1: GENERAL PROVISIONS1.

PURPOSEa) The purpose of this Sector Understanding is to provide a framework for the predictable,consistent and transparent use of officially supported export credits for the sale or lease of
aircraft and other goods and services specified in Article 4 a) below. This Sector Understanding
seeks to foster a level playing field for such export credits, in order to encourage competition
among exporters based on quality and price of goods and services exported rather than on themost favourable officially supported financial terms and conditions.
b) This Sector Understanding sets out the most favourable terms and conditions on which officially
supported export credits may be provided.
c) To this aim, this Sector Understanding seeks to establish a balanced equilibrium that, on all
markets:
1) Equalises competitive financial conditions between the Participants,
2) Neutralises official support among the Participants as a factor in the choice among
competing goods and services specified in Article 4 a) below, and
3) Avoids distortion of competition among the Participants to this Sector Understanding andany other sources of financing.
d) The Participants to this Sector Understanding (the Participants) acknowledge that the provisions
included in this Sector Understanding have been developed for the sole purpose of this Sector
Understanding and such provisions do not prejudice the other parts of the Arrangement on
Officially Supported Export Credits (the Arrangement) and their evolution.

2.

STATUSThis Sector Understanding is a Gentlemen’s Agreement among its Participants and is Annex III to the
Arrangement; it forms an integral part of the Arrangement and it succeeds the Sector Understanding,which came into effect in July 2007.

3.

PARTICIPATIONThe Participants currently are: Australia, Brazil, Canada, the European Union, Japan, Korea,
New Zealand, Norway, Switzerland, the United Kingdom and the United States. Any non-Participant may
become a Participant in accordance with the procedures set out in Appendix I.

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TAD/PG(2023)7  57

4.

SCOPE OF APPLICATIONa) This Sector Understanding shall apply to all official support provided by or on behalf of agovernment, and which has a repayment term of two years or more, for the export of:1) New civil aircraft and engines installed thereon, including buyer furnished equipment.
2) Used, converted, and refurbished civil aircraft and engines installed thereon, including, ineach case, buyer furnished equipment.
3) Spare engines.
4) Spare parts for civil aircraft and engines.
5) Maintenance and service contracts for civil aircraft and engines.
6) Conversion, major modifications and refurbishment of civil aircraft.
7) Engine kits.
b) Official support may be provided in different forms:
1) Export credit guarantee or insurance (pure cover).
2) Official financing support:‒ direct credit/financing and refinancing or‒ interest rate support.
3) Any combination of the above.
c) This Sector Understanding shall not apply to official support for:1) The exports of new or used military aircraft and related goods and services listed inparagraph a) above, including when used for military purposes.
2) New or used flight simulators.

5.

INFORMATION AVAILABLE TO NON-PARTICIPANTS

A Participant shall, on the basis of reciprocity, reply to a request from a non-Participant in a competitive
situation on the financial terms and conditions offered for its official support as it would reply to a requestfrom a Participant.

6.

AID SUPPORTThe Participants shall not provide aid support, except for humanitarian purposes, through a Common Lineprocedure.

7.

ACTIONS TO AVOID OR MINIMISE LOSSES

This Sector Understanding does not prevent its Participants from agreeing to less restrictive financial
terms and conditions than those provided for by this Sector Understanding, if such action is taken after
the export credit agreement and ancillary documents have already become effective and is intended solely
to avoid or minimise losses from events which could give rise to non-payment or claims. A Participant
shall notify all other Participants and the OECD Secretariat (the Secretariat), within 20 working days
following the Participant's agreement with the buyer/borrower, of the modified financial terms andconditions. The notification shall contain information, including the motivation, on the new financial
terms and conditions, using the reporting form set out in Appendix IV.

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58  TAD/PG(2023)7

PART 2: NEW AIRCRAFT
CHAPTER I: COVERAGE
8.

NEW AIRCRAFTa) For the purpose of this Sector Understanding, a new aircraft is:1) An aircraft, including buyer furnished equipment, and the engines installed on such aircraft
owned by the manufacturer and not delivered nor previously used for its intended purposeof carrying passengers and/or freight and2) Spare engines and spare parts when contemplated as part of the original aircraft order inaccordance with the provisions of Article 20 a) below.
b) Notwithstanding the provisions of paragraph a) above, a Participant may support terms
appropriate to new aircraft for transactions where, with the prior knowledge of that Participant,interim financing arrangements had been put in place because the provision of official support
had been delayed; such delay shall not be longer than 18 months. In such cases, the repayment
term and the final repayment date shall be the same as if the sale or lease of the aircraft would
have been officially supported from the date the aircraft was originally delivered.

CHAPTER II: FINANCIAL TERMS AND CONDITIONS
Financial terms and conditions for export credits encompass all the provisions set out in this Chapter,
which shall be read in conjunction one with the other.

9.

ELIGIBLE CURRENCIESThe currencies, which are eligible for official financing support, are euro, Japanese yen, UK poundsterling, US dollar, and other fully convertible currencies for which data are available to construct theminimum interest rates mentioned in Appendix III.

10.

DOWN PAYMENT AND MAXIMUM OFFICIAL SUPPORTa) For transactions with buyers/borrowers classified in Risk Category 1 (as per Table 1 ofAppendix II), the Participants shall:
1) Require a minimum down payment of 20% of the net price of the aircraft at or before thestarting point of credit;
2) Not provide official support in excess of 80% of the net price of the aircraft.
b) For transactions with buyers/borrowers classified in Risk Categories 2 to 8 (as per Table 1 ofAppendix II), the Participants shall:
1) Require a minimum down payment of 15% of the net price of the aircraft at or before thestarting point of credit;
2) Not provide official support in excess of 85% of the net price of the aircraft.
c) A Participant which applies Article 8 b) above shall reduce the maximum amount of official
support by the amount of principal of the instalments deemed due from the starting point of thecredit so as to ensure that, at the time of disbursement, the amount outstanding is the same as if
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS

Unclassified

TAD/PG(2023)7  59

such an officially supported export credit was provided at the time of delivery. In suchcircumstances, prior to delivery the Participant shall have received an application for official
support.

11.

MINIMUM PREMIUM RATESa) The Participants providing official support shall charge, for the credit amount officially
supported, no less than the minimum premium rate set out in accordance with Appendix II.
b) The Participants shall use, whenever necessary, the agreed premium rate conversion model toconvert between per annum spreads calculated on the outstanding amount of the official supportand single up-front premium rates calculated on the original amount of the official support.

12.

MAXIMUM REPAYMENT TERMa) The maximum repayment term shall be 12 years for all new aircraft.
b) On an exceptional basis, and with a prior notification, a maximum repayment term of up to
15 years shall be allowed. In this case, a surcharge of 35% to the minimum premium rates
calculated in accordance with Appendix II shall apply.
c) There shall be no extension of the repayment term by way of sharing of rights in the security on
a pari passu basis with commercial lenders for the officially supported export credit.

13.

REPAYMENT OF PRINCIPAL AND PAYMENT OF INTERESTa) The Participants shall apply a profile of repayment of principal and payment of interest as
specified in sub-paragraph 1) or 2) below1.
1) Repayment of principal and payment of interest combined shall be made in equal
instalments:‒ Instalments shall be made no less frequently than every three months and the first
instalment shall be made no later than three months after the starting point of credit.
‒ Alternatively, and subject to a prior notification (unless it is a de minimis transaction),
instalments shall be made every six months and the first instalment shall be made no
later than six months after the starting point of credit. In this case, a surcharge of 15%
to the minimum premium rates calculated in accordance with Appendix II shall apply.
‒ In the case of a floating rate transaction, the principal amortising profile shall be set for
the entire term, no more than five business days prior to the disbursement date, basedon the floating or swap rate at that time.
2) Repayment of principal shall be made in equal instalments with interest payable on
declining balances:‒ Instalments shall be made no less frequently than every three months and the first
instalment shall be made no later than three months after the starting point of credit.
‒ Alternatively, and subject to a prior notification (unless it is a de minimis transaction),
instalments shall be made every six months and the first instalment shall be made no1

Ex-ante semi-annual repayment reporting requirement does not apply to small aircraft transactions with a
total financed amount of less than USD 5 million (i.e., de minimis transactions).

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60  TAD/PG(2023)7
later than six months after the starting point of credit. In this case, a surcharge of 15%
to the minimum premium rates calculated in accordance with Appendix II shall apply.
b) Notwithstanding paragraph a) above, and subject to a prior notification, the repayment ofprincipal may be structured to include a final payment of all outstanding amounts on a specified
date. In such case, repayments of principal prior to the final payment will be structured as set
out in paragraph a) above, based on an amortization period not greater than the maximum
repayment term allowed for the goods and services being supported.
c) Notwithstanding paragraph a) above, repayment of principal may be structured on terms lessfavourable to the obligor.
d) Interest due after the starting point of credit shall not be capitalised.

14.

MINIMUM INTEREST RATESa) The Participants providing official financing support shall apply either a minimum floatinginterest rate or a minimum fixed interest rate, in accordance with the provisions of Appendix III.
b) For jet aircraft of a net price of at least USD 35 million, official financing support on CIRR basis
shall only be provided in exceptional circumstances. A Participant intending to provide suchsupport shall notify all other Participants at least 20 calendar days before final commitment,
identifying the borrower.
c) Interest rate excludes any payment by way of premium referred to in Article 11 above, and fees
referred to in Article 16 below.

15.

INTEREST RATE SUPPORTThe Participants providing interest rate support shall comply with the financial terms and conditions of
this Sector Understanding and shall require any bank or any other financial institution which is a party to
the interest supported transaction to participate in that transaction only on terms that are consistent in all
respects with the financial terms and conditions of this Sector Understanding.

16.

FEES
a) Subject to the limits of the premium holding period, the Participants providing official support
in the form of pure cover shall charge a premium holding fee on the un-drawn portion of theofficial support during the premium holding period, as follows:
1) For the first six months of the holding period: zero basis points per annum.
2) For the second six months of the holding period: 12.5 basis points per annum.
3) For the third and final six months of the holding period: 25 basis points per annum.
b) The Participants providing official support in the form of direct credit / financing shall charge
the following fees:
1) Arrangement / Structuring fee: 25 basis points on the disbursed amount payable at the timeof each disbursement.
2) Commitment and premium holding fee: 20 basis points per annum on the un-drawn portionof the officially supported export credit to be disbursed, during the premium holding period,
payable in arrears.

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TAD/PG(2023)7  613) Administration fee: five basis points per annum on the amount of official support
outstanding payable in arrears. Alternatively, the Participants may elect to have this fee
payable as an upfront fee, on the amount disbursed, at the time of each disbursement
pursuant to the provisions of Article 11 b) above.

17.

CO-FINANCING

Notwithstanding Articles 14 and 16 above, in a co-financing where official support is provided by way of
direct credit and pure cover, and where pure cover represents at least 35% of the officially supported
amount, the Participant providing direct credit shall apply the same financial terms and conditions,
including fees, as those provided by the financial institution under pure cover, to generate an all-in costequivalence between the pure cover provider and the direct lender. In such circumstances, the Participant
providing such support shall report the financial terms and conditions supported, including fees, inaccordance with the reporting form set out in Appendix IV.

PART 3: USED AIRCRAFT, SPARE ENGINES, SPARE PARTS,
MAINTENANCE AND SERVICE CONTRACTS
CHAPTER I: COVERAGE
18.

USED AIRCRAFT AND OTHER GOODS AND SERVICES

This Part of the Sector Understanding shall apply to used aircraft and to spare engines, spare parts,
conversion, major modification, refurbishing, maintenance and service contracts in conjunction with both
new and used aircraft and engine kits.

CHAPTER II: FINANCIAL TERMS AND CONDITIONS
The financial terms and conditions to be applied, other than the maximum repayment term, shall be inaccordance with the provisions set out in Part 2 of this Sector Understanding.

19.

SALE OF USED AIRCRAFTa) Subject to paragraph b) below, the maximum repayment term for used aircraft shall beestablished in accordance with the age of the aircraft, as set out in the following table:
Age of aircraft (years since thedate of original manufacture)

Maximum repayment terms for assetbacked or sovereign transactions(years)Maximum repayment terms fortransactions neither asset-backed norsovereign (years)

1

10

8.5

2

9

7.5

3

8

6.5

4

7

6

5–8

6

5.5

Over 85

5

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Unclassified62  TAD/PG(2023)7b) The maximum repayment term for aircraft that have undergone conversion, provided thetransaction meets all the requirements of Article 19 of Appendix II and provided further that
official support, if any, provided in respect of such conversion was not provided in accordancewith Article 21 a) below, shall be established in accordance with the period of time since thedate of conversion and the age of the aircraft, as set out in the following table:
Maximum repayment terms for asset-backed converted aircraft (years)
Period of time since the date of conversion(years)20.

Age of aircraft (years since the date of original
manufacture)
1

2

3

4

5-8

Over 80 (Newly converted)

10

9

8

8

8

8

1

10

9

8

7

7

7

2

-----

9

8

7

6

6

3 or more

-----

-----

8

7

6

5

SPARE ENGINES AND SPARE PARTSa) When purchased, or ordered in connection with the engines to be installed on a new aircraft, theofficial support for spare engines may be provided on the same terms and conditions as for theaircraft.
b) When purchased with new aircraft, the official support for spare parts may be provided on thesame terms and conditions as for the aircraft up to a maximum 5% of the net price of the newaircraft and installed engines; paragraph d) below shall apply to official support for spare partsin excess of the 5% limit.
c) When spare engines are not purchased with a new aircraft, the maximum repayment term shallbe eight years. For spare engines with a unit value of USD 10 million or more, the repayment
term may be increased to 10 years, provided the transaction meets all the requirements ofArticle 19 of Appendix II.
d) When other spare parts are not purchased with a new aircraft, the maximum repayment term
shall be:1) Five years with a contract value of USD 5 million or more.
2) Two years with a contract value of less than USD 5 million.

21.

CONTRACTS FOR CONVERSION/MAJOR MODIFICATION/REFURBISHINGa) If a transaction for conversion:
1) Is valued at USD 5 million or more, and‒ Meets all the requirements of Article 19 of Appendix II, a Participant may offer official
support with a repayment term of up to eight years.
‒ Does not meet all the requirements of Article 19 of Appendix II, a Participant may offer
official support with a repayment term of up to five years.
2) Is valued at less than USD 5 million, a Participant may offer official support with arepayment term of up to two years.
b) If a transaction is for a major modification, or refurbishment, a Participant may offer official
support with a repayment term of up to:
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1) Five years if the contract value is USD 5 million or more;
2) Two years, if the contract value is less than USD 5 million.

22.

MAINTENANCE AND SERVICE CONTRACTS

The Participants may offer official support with a repayment term of up to three years.

23.

ENGINE KITS

The Participants may offer official support with a repayment term of up to five years.

PART 4: TRANSPARENCY PROCEDURES
All communications shall be made between the designated contact points in each Participant country bymeans of instant communication, e.g. using the electronic mail system that is maintained by the Secretariat
to facilitate communications amongst Participants and the Secretariat. Unless otherwise agreed, allinformation exchanged under this Part of the Sector Understanding shall be treated by all Participants asconfidential.

SECTION 1: INFORMATION REQUIREMENTS
24.

INFORMATION ON OFFICIAL SUPPORTa) Within one month after the date of a final commitment, a Participant shall submit the
information required in Appendix IV to all other Participants, with a copy to the Secretariat.
b) In order to establish the margin benchmark in accordance with Appendix III Article 8 b),
information on pure cover margins, as outlined in Appendix III Articles 8 c) and 8 d), shall be
submitted to the Secretariat no later than five days after the end of each month.

SECTION 2: EXCHANGE OF INFORMATION
25.

REQUESTS FOR INFORMATIONa) A Participant may ask another Participant for information about the use of its officially
supported export credits for the sale or lease of aircraft covered by this Sector Understanding.
b) A Participant that has received an application for official support may address an enquiry toanother Participant, giving the most favourable credit terms and conditions that the enquiring
Participant would be willing to support.
c) The Participant to which such an enquiry is addressed shall respond within seven calendar days
and provide reciprocal information to the fullest extent possible. The reply shall include the bestindication that the Participant can give of the decision it is likely to take. If necessary, the full
reply shall follow as soon as possible.
d) Copies of all enquiries and responses shall be sent to the Secretariat.

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26.

FACE-TO-FACE CONSULTATIONSa) In a competitive situation, a Participant may request face-to-face consultations with one or more
Participants.
b) Any Participant shall agree within ten working days to such requests.
c) The consultations shall take place as soon as possible after the expiry of the ten working-day
period.
d) The Chairman of the Participants shall co-ordinate with the Secretariat on any necessary follow
up action. The Secretariat shall promptly make available to all Participants the outcome of theconsultation.

27.

SPECIAL CONSULTATIONSa) A Participant (the initiating Participant) that has reasonable grounds to believe that financial
terms and conditions offered by another Participant (the responding Participant) are moregenerous than those provided for in this Sector Understanding shall inform the Secretariat; theSecretariat shall immediately make available such information to the responding Participant.
b) The responding Participant shall clarify the financial terms and conditions of the official support
being considered within five working days following the issue of the information from theSecretariat.
c) Following clarification by the responding Participant, the initiating Participant may request thata special consultation with the responding Participant be organised by the Secretariat within fiveworking days to discuss the issue.
d) The responding Participant shall wait for the outcome of the consultation which shall be
determined on the day of such consultation before proceeding any further with the transaction.

SECTION 3: COMMON LINES
28.

PROCEDURES AND FORMAT OF COMMON LINESa) Common Line proposals shall be addressed to the Secretariat only. The identity of the initiator
is not revealed on the Common Line register on the electronic bulletin board maintained by
the Secretariat on the OECD Network Environment. However, the Secretariat may orally
reveal the identity of the initiator to a Participant on demand. The Secretariat shall keep arecord of such requests.
b) The Common Line proposal shall be dated and shall be in the following format:
1) Reference number, followed by Common Line.
2) Name of the importing country and buyer/borrower.
3) Name or description of the transaction as precise as possible to clearly identify thetransaction.
4) Common Line proposal for the most generous terms and conditions to be supported.
5) Nationality and names of known competing bidders.
6) Bid closing date and tender number to the extent it is known.
7) Other relevant information, including reasons for proposing the Common Line and as
appropriate, special circumstances.

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29.

RESPONSES TO COMMON LINE PROPOSALSa) Responses shall be made within 20 calendar days, although the Participants are encouraged torespond to a Common Line proposal as quickly as possible.
b) A response may be acceptance, rejection, a request for additional information, a proposal for
modification of the Common Line or an alternative Common Line proposal.
c) A Participant that remains silent or advises that it has no position shall be deemed to haveaccepted the Common Line proposal.

30.

ACCEPTANCE OF COMMON LINESa) After a period of 20 calendar days, the Secretariat shall inform all Participants of the status of
the Common Line proposal. If not all Participants have accepted the Common Line, but noParticipant has rejected it, the proposal shall be left open for a further period of eight calendar
days.
b) After this further period, a Participant that has not explicitly rejected the Common Line proposal
shall be deemed to have accepted the Common Line. Nevertheless, a Participant, including theinitiating Participant, may make its acceptance of the Common Line conditional on the explicit
acceptance by one or more Participants.
c) If a Participant does not accept one or more elements of a Common Line it implicitly accepts
all other elements of the Common Line.

31.

DISAGREEMENT ON COMMON LINESa) If the initiating Participant and a Participant which has proposed a modification or alternative
cannot agree on a Common Line within the additional eight calendar-day period mentioned in
Article 30 above, this period can be extended by their mutual consent. The Secretariat shallinform all Participants of any such extension.
b) A Common Line that has not been accepted may be reconsidered using the procedures in
Articles 28 to 30 above. In these circumstances, the Participants are not bound by their originaldecision.

32.

EFFECTIVE DATE OF COMMON LINEThe Secretariat shall inform all Participants either that the Common Line will go into effect or that it has
been rejected; the agreed Common Line will take effect three calendar days after this announcement.

33.

VALIDITY OF COMMON LINESa) Unless agreed otherwise, a Common Line, once agreed, shall be valid for a period of two years
from its effective date, unless the Secretariat is informed that it is no longer of interest, and thatsuch situation is accepted by all Participants.
b) If a Participant seeks an extension within 14 calendar days of the original date of expiry and in
the absence of disagreement, a Common Line shall remain valid for a further two-year period;
subsequent extensions may be agreed through the same procedure.
c) The Secretariat shall monitor the status of Common Lines and shall keep the Participants
informed accordingly, through the maintenance of the listing “The Status of Valid Common
Lines” on the electronic bulletin board. Accordingly, the Secretariat, inter alia, shall issue, on aquarterly basis, a list of Common Lines due to expire in the following quarter.
d) Upon the request of a non-Participant that produces competing aircraft, the Secretariat shallmake available valid Common Lines to that non-Participant.

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SECTION 4: MATCHING
34.

MATCHINGa) Taking into account a Participant’s international obligations, a Participant may match financial
terms and conditions of official support offered by a non-Participant.
b) In the event of matching non-conforming terms and conditions offered by a non-Participant:1) The matching Participant shall make every effort to verify such terms and conditions.
2) The matching Participant shall inform the Secretariat and all other Participants of the natureand outcome of such efforts, as well as of the terms and conditions it intends to support, atleast ten calendar days before issuing any commitment.
3) If a competing Participant requests a discussion during this ten calendar-day period, thematching Participant shall wait an additional ten calendar days before issuing any
commitment on such terms.
c) If a matching Participant modifies or withdraws its intention to support the notified terms andconditions, it shall immediately inform all other Participants accordingly.

PART 5: MONITORING AND REVIEW
35.

MONITORINGThe Secretariat shall monitor the implementation of this Sector Understanding and report to theParticipants on an annual basis.

36.

REVIEW

The Participants shall review the procedures and provisions of this Sector Understanding, against thecriteria, and at the times, set out in paragraphs a) and b) below.
a) The Participants shall undertake the review of this Sector Understanding as follows:
1) In calendar year 2019 and every fourth year thereafter, in each case with three months priornotice given by the Secretariat.
2) At the request of a Participant after due consultation, provided that three months prior notice
has been given by the Secretariat and the requesting Participant provides a written
explanation of the reason for, and objectives of, the review as well as a summary of theconsultations preceding its request.
3) Modalities of update of minimum premium rates and minimum interest rates are set out inAppendices II and III respectively.
4) Fees set out in Article 16 shall be part of reviews.
b) The review set out in sub-paragraph a) 1) above shall consider:
1) The extent to which the purposes of this Sector Understanding, as set out in Article 1 above,
have been achieved and any other issue a Participant may wish to bring forward for
discussion.
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2) In view of the elements in sub-paragraph b) 1) above, whether amendments to any aspectof this Sector Understanding are justified.
c) In recognition of the importance of the review process, to ensure that the terms and conditionsof this Sector Understanding continue to meet the needs of the Participants, each Participant
reserves the right to withdraw from this Sector Understanding in accordance with Article 40
below.

37.

FUTURE WORK

Consideration will be given to:a) Examining Participants’ practices in providing official support before the starting point of credit.
b) The provisions applicable to indirect loans.
c) An extension of maximum repayments terms under Article 19 for used aircraft that haveundergone significant refurbishment prior to sale.
d) An extension of maximum repayment terms under Article 21 for larger contract values.
e) The provisions applicable to “refurbishing” (Article 21) and “services” (Article 22).
f) The Cape Town eligibility process.
g) The definition of “Interested Participant”.

PART 6: FINAL PROVISIONS38.

ENTRY INTO FORCEThe effective date of this Sector Understanding is 1 February 2011.

39.

WITHDRAWAL

A Participant may withdraw from this Sector Understanding by notifying the Secretariat in writing bymeans of instant communication, e.g. electronic mail. The withdrawal takes effect six months after receiptof the notification by the Secretariat. Withdrawal will not affect agreements reached on individualtransactions entered into prior to the effective date of the withdrawal.

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APPENDIX IPARTICIPATION IN THE AIRCRAFT SECTOR UNDERSTANDING

1.
The Participants encourage non-Participants that are developing a manufacturing capacity forcivil aircraft to apply the disciplines of this Sector Understanding. In this context the Participants invite
non-Participants to enter into a dialogue with them regarding the conditions of joining the ASU.
2.
The Secretariat should ensure that a non-Participant interested in participating in this Sector
Understanding is provided with full information on the terms and conditions associated with becoming a
Participant to this Sector Understanding.
3.
The non-Participant would then be invited by the Participants to take part in the activities inpursuance of this Sector Understanding and to attend, as an observer, the relevant meetings. Such an
invitation would be for a maximum of two years and could be renewed once for a further two years.
During this period the non-Participant shall be invited to provide a review of its export credit system,
especially for the export of civil aircraft.
4.
At the end of that period, the non-Participant shall indicate whether it wishes to become aParticipant in this Sector Understanding and to follow its disciplines; in the case of such confirmation, thenon-Participant shall contribute, on an annual basis, to the costs associated with the implementation ofthis Sector Understanding.
5.
The interested non-Participant shall be considered a Participant 30 working days after theconfirmation referred to in Article 4 of this Appendix.

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APPENDIX IIMINIMUM PREMIUM RATESThis Appendix sets out the procedures to be used when determining the pricing of official support for atransaction subject to this Sector Understanding. Section 1 sets out the risk classification procedures;
Section 2 sets out the minimum premium rates to be charged for new and used aircraft, and Section 3 sets
out the minimum premium rates to be charged for spare engines, spare parts, conversion/major
modification/refurbishing, maintenance and service contracts, and engine kits.

SECTION 1: PROCEDURES FOR RISK CLASSIFICATION
1.
The Participants have agreed on a list of risk classifications (the List) for buyers/borrowers; suchrisk classifications reflect the senior unsecured credit rating of buyers/borrowers using a common rating
scale such as that of one of the credit rating agencies (CRA).
2.
The risk classifications will be made by experts nominated by the Participants against the risk
categories set out in Table 1 of this Appendix.
3.
The List shall be binding at any stage of the transaction (e.g. campaign and delivery), subject tothe provisions of Article 15 of this Appendix.

I.

ESTABLISHMENT OF THE LIST OF RISK CLASSIFICATIONS

4.
The List shall be developed and agreed among the Participants prior to the entry into force of
this Sector Understanding; it shall be maintained by the Secretariat and made available to all theParticipants on a confidential basis.
5.
Upon request, the Secretariat may, on a confidential basis, inform an aircraft-producing
non-Participant of the risk classification of a buyer/borrower; in this case, the Secretariat shall inform all
Participants of the request. A non-Participant may, at any time, propose additions to the List to theSecretariat. A non-Participant proposing an addition to the List may participate in the risk-classification
procedure as if it were an interested Participant.

II.

UPDATE OF THE LIST OF RISK CLASSIFICATIONS

6.
Subject to the provisions of Article 15 of this Appendix, the List may be updated on an ad hoc
basis in the event that either a Participant signals, in any form, its intention to apply another risk
classification than that on the List, or a Participant needs a risk classification for a buyer/borrower that is
not yet on the List1 2.

1

An explanation shall be provided where the proposed risk-rating of a buyer/borrower exceeds the risk ratingof the host sovereign.
2

For transactions with an export contract value of less than USD 5 million, a Participant not wishing to follow
the risk classification procedure set out in Articles 6 to 8 of this Appendix shall apply the risk classification “8” forthe buyer/borrower which is the subject of the transaction and shall notify the transaction in accordance with
Article 24 a) of this Sector Understanding.

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7.
Any Participant shall, before any use of an alternative or new risk classification, send a request
to the Secretariat for updating the List on the basis of an alternative or new risk classification. The
Secretariat will circulate this request to all Participants within two working days, without mentioning theidentity of the Participant who submitted the request.
8.
A period of ten3 working days is allowed for interested Participants either to agree to or tochallenge any proposed change to the List; a failure to respond within this period is considered as anagreement to the proposal. If at the end of the ten-day period, no challenge has been made to the proposal,
the proposed change in the List is deemed to have been agreed. The Secretariat will modify the List
accordingly and send a message via electronic mail within five working days; the revised List shall bebinding from the date of that message.

III. RESOLUTION OF DISAGREEMENTS
9.
In the event of a challenge to a proposed risk classification, interested Participants shall, at anexpert level, make their best efforts to come to an agreement on the risk classification within a further
period of ten working days after notification of a disagreement. All means necessary to resolve thedisagreement should be explored, with the assistance of the Secretariat if necessary (e.g. conference calls
or face-to-face consultations). If interested Participants agree to a risk classification within this ten
working-day period, they shall inform the Secretariat of the outcome upon which the Secretariat will
update the List accordingly and send a message via electronic mail in the following five working days.
The adjusted List shall be binding from the date of that message.
10.
In case the disagreement is not resolved among the experts within ten working days, the issue
will be referred to the Participants for decision on an appropriate risk classification, in a period that shallnot exceed five working days.
11.
In the absence of a final agreement, a Participant may have recourse to a CRA to determine therisk classification of the buyer/borrower. In such cases, the Chairman of the Participants shall address a
communication on behalf of the Participants to the buyer/borrower, within ten working days. The
communication shall include the terms of reference for the risk assessment consultation as agreed among
the Participants. The resulting risk classification will be registered in the List and become binding
immediately following the Secretariat’s message to finalise the update procedure within five working
days.
12.
Unless otherwise agreed, the cost of such recourse to a CRA shall be borne by the interested
buyer/borrower.
13.
During the procedures set out in Articles 9 to 11 of this Appendix, the prevailing risk
classification (when available on the List) shall remain applicable.

IV. VALIDITY PERIOD OF CLASSIFICATIONS
14.
The valid risk classifications are the prevailing risk classifications as recorded in the List
maintained by the Secretariat; indications and commitments of premium rates shall only be made inaccordance with those risk classifications.

3

For transactions with an export contract value of less than USD 5 million, a five working-day period shallapply.

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15.
Risk classifications have a 12-month maximum validity period from the date recorded in the
List by the Secretariat for the purpose of the Participants providing indication and final commitments ofpremium rates; the validity period for a specific transaction may be extended by an additional 18 months
once a commitment or a final commitment has occurred and premium holding fees are charged. Risk
classifications may be subject to revision during the 12-month validity period in case of material changes
to the risk profile of the buyer/borrower, such as a modification of a rating delivered by a CRA.
16.
Unless any Participant requests its update, at least 20 working days before the end of the relevantrisk classification validity period, the Secretariat shall remove that risk classification from the next
succeeding updated List. The Secretariat will circulate this update request to all Participants within two
working days, without mentioning the identity of the Participant who submitted the request, and theprocedures set out in Articles 9 to 11 of this Appendix shall apply.

V.

BUYER/BORROWER RISK CLASSIFICATION REQUEST

17.
If, at the campaign stage, a buyer/borrower requests an indication of its risk classification and if
it is not yet on the List, that buyer/borrower may ask for an indicative risk classification from a CRA at
its own expense. This risk classification shall not be included in the List; it may be used by the Participants
as a basis for their own risk assessment.

SECTION 2: MINIMUM PREMIUM RATES FOR NEW AND USED AIRCRAFTI.

ESTABLISHMENT OF THE MINIMUM PREMIUM RATES

18.
Articles 19 to 60 of this Appendix set out the minimum premium rates corresponding to the risk
classification of a buyer/borrower (or, if a different entity, the primary source of repayment of thetransaction).
19.
The Participants may provide official support at or above the minimum premium rate provided
that all the conditions below are fulfilled:a) The transaction is asset-backed, meeting all of the following criteria:
1) A first priority security interest on or in connection with the aircraft and engines.
2) In the case of a lease structure, assignment and/or a first priority security interest inconnection with the lease payments.
3) Cross default and cross collateralization of all aircraft and engines owned legally andbeneficially by the same parties under the proposed financing, whenever possible under theapplicable legal regime.
b) The transaction is structured to include, as a minimum, risk mitigants as set out in Table 1 below:

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Table 1. Risk Mitigants

20.

ASU Risk Category

Risk Ratings

1
2

Risk Mitigants
TOTAL

Of which at least “A”

AAA to BBB-

00

BB+ and BB

0

0

3

BB-

1

1

4

B+

2

1

5

B

2

1

6

B-

3

2

7

CCC

4

3

8

CC to C

4

3

For purposes of Article 19 of this Appendix:a) The Participants may select from the following risk mitigants:“A” risk mitigants:
1) Reduced advance rate: each reduction of five percentage points from the advance rates
referred to in Articles 10 a) and 10 b) of this Sector Understanding is equivalent to one “A”
risk mitigant. In this case, the Participant shall not provide official support in any form inexcess of the reduced advance rate.
2) Straight line amortisation: repayment of principal in equal instalments is equivalent to one
risk mitigant.
3) Reduced repayment term: a repayment term that does not exceed ten years is equivalent to
one risk mitigant, irrespective of the maximum repayment term allowed.
“B” risk mitigants:
1) Security deposit: each security deposit in an amount equal to one quarterly instalment ofprincipal and interest is equivalent to one risk mitigant. The security deposit can be in theform of cash or a standby letter of credit.
2) Lease payments in advance: lease payments in an amount equal to one quarterly instalmentof principal and interest shall be paid one quarter in advance of each repayment date.
3) Maintenance reserves in a form and amount reflective of market best practices.
b) Subject to a prior notification, up to one of the "A" risk-mitigants may be replaced by a 15%
surcharge on the applicable minimum premium rate.

21.
Minimum premium rates to be applied to a transaction can be set prior to delivery, either at
commitment, final commitment or otherwise at the commencement of a premium holding period with adefined duration. Final upfront premium rate, per annum spread, or a combination thereof to be applied
to the transaction will comply with the minimum premium rate so established as well as mandatory risk
mitigants prescribed in Article 19 b) of this Appendix as of the date on which the minimum premium rates
were set. Such terms shall apply for the full length of the premium holding period and may only be revised
following the expiry of that period, at which time the minimum premium rates and mandatory risk
mitigants prescribed by the ASU then in force will apply and may be set for a subsequent premium holding
period.
22.
Pursuant to Article 11 of this Sector Understanding, the minimum premium rates to be applied
are composed of minimum risk-based rates (RBR) to which a market reflective surcharge (MRS) shall be
added, in accordance with Articles 23 to 35 below.

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23.

As of the entry into force of this Sector Understanding, the RBRs are:Table 2. Risk-based rates
ASU Risk Category

Spreads (bps)

Upfront (%)

1

89

4.98

2

98

5.49

3

116

6.52

4

133

7.49

5

151

8.53

6

168

9.51

7

185

10.50

8

194

11.03

24.
The RBRs rates shall be reset on an annual basis, based on 4-year moving average of the annual
Moody´s Loss Given Default (LGD). The appropriate LGD for this reset is based on the 1 st Lien Senior
Secured Bank Loans, and shall be calculated as follows:
Table 3. LGD Mapping25.

4-year Moving Average

LGD Considered

>=45%

25%

>='35%' < 45%

23%>='30%' < 35%

21%

< 30%

19%

A RBR adjustment factor shall be determined as follows:
LGD Considered = RBR adjustment factor
19%

26.
The RBR adjustment factor shall be multiplied by the RBRs set out in Table 2 above, in orderto determine the reset RBRs.
27.
The RBRs resulting from the reset processes listed above will be effective as of 15 April of eachfollowing year. Once the RBRs resulting from the annual reset have been determined, the Secretariat shallinform immediately all Participants of the applicable rates and make them publicly available.
28.

For each risk category, a Market Reflective Surcharge shall be calculated as follows:
MRS = B*[(0.5*MCS)-RBR]

where:‒

B is a blend coefficient varying from 0.7 to 0.35 according to each risk category as per
Table 4 below.

‒

MCS is a 90-day moving average of Moody’s Median Credit Spreads (MCS) with anaverage life of 7 years.

29.
Where risk categories include more than one risk rating, the spreads shall be averaged. In risk
category 1, the BBB- spread shall be used.
30.
The MCS spreads shall be discounted by 50% to account for the asset-security. The MCS
discounted spreads shall then be adjusted by a blend factor ranging from 70% to 35% as per Table 4

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below, applied on the difference between the MCS discounted spreads and the RBR. Any negative spreads
resulting from the blending shall not be deducted.
Table 4. Blend factors
Risk-Ratings

ASU Risk Category

Blend Factor (%)

AAA

1

70

AA

1

70

A

1

70

BBB+

1

70

BBB

1

70

BBB-

1

70

BB+

2

65

BB

2

65

BB-

3

50

B+

4

45

B

5

40

B-

6

35

CCC

7

35

CC

8

35

C

8

35

31.
The MRS shall be updated on a quarterly basis and the resulting MCS shall become effective
respectively on 15 January, 15 April, 15 July and 15 October of each year. Following each update, theSecretariat shall inform immediately all Participants of the applicable MRS and the resulting minimum
rates and make them available to Participants prior to the date these rates become effective.
32.
The increase in minimum premium rates resulting from the MRS update shall be capped at 10%of the previous quarterly minimum premium rates. Therefore, the minimum premium rates (which result
from adding the RBRs and the MRS) shall be capped at 200% of the RBRs and floored at 100% of the
RBRs.
33.
The premium rates resulting from the application of Article 32 for risk categories 2-8 shall be
adjusted, if necessary, to ensure that the premium rate for each risk category is no lower than the premium
rate for the risk category that immediately precedes it (i.e. the premium rate for category “x” that is lower
than the premium rate for category “x-1” will be adjusted upwards to the level of the premium rate forcategory “x-1”).
34.

In order to determine the minimum premium rates:‒

The following formula shall be used:
Net MPR = MPR*(1+RTAS)*(1+RFAS)*(1+RMRS)*(1-CTCD)*(1+NABS) - CICD
Where:•

RTAS represents the repayment term adjustment surcharge set out in Article 12 b) of
this Sector Understanding.

•

RFAS represents the repayment frequency adjustment surcharge set out in
Articles 13 a) 1) and 2) of this Sector Understanding.

•

RMRS represents the risk mitigant replacement surcharge set out in Article 20 b) of
this Appendix.

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CTCD represents the Cape Town Convention Discount set out in Article 38 of thisAppendix.

•

NABS represents the non-asset-backed surcharge set out in Articles 57 a) 4), 57 b) and59 b) of this Appendix, as applicable.

•

CICD represents the conditional insurance coverage discount set out in Article 56 a)of this Appendix.

Premium may be paid either upfront or, over the life of the facility, as spreads expressed inbasis points per annum, or in any combination of upfront rates and spreads. The upfront
rates and spreads shall be calculated using the premium rate conversion model (PCM) sothat the premium payable for a given transaction has the same NPV whether payable
upfront, as a spread over the life of the facility, or a combination thereof. In transactions
where, prior to the commencement of cover, terms are agreed or stipulated, which entail areduction in the weighted average life, an upfront rate (calculated using the PCM) may becharged, which in terms of the resulting premium payable, corresponds to that payable in
NPV terms under the spreads.

35.
The applicable minimum premium rates are published on the OECD website, using the format
set out in Table 5 below.
Table 5. Minimum premium rates(12-year repayment term, asset-backed transactions)II.

Risk category

Risk classification

1

AAA to BBB-

2

BB+ and BB

3

BB-

4

B+

5

B

6

B-

7

CCC

8

CC to C

Minimum premium rates
Per annum spreads (bps)

Up-front (%)

REDUCTIONS OF THE MINIMUM PREMIUM

36.
Subject to the provisions of Article 37 of this Appendix, a reduction of the minimum premium
rates established in accordance with sub-Section I above shall be allowed if:a) The asset-backed transaction relates to an aircraft object within the meaning of the Cape Town
Protocol on Matters Specific to Aircraft Equipment,b) The operator of the aircraft object (and, if different, the borrower/buyer or lessor if, in the viewof the Participant providing the official support, the structure of the transaction so warrants) is
situated in a State which, at the time of disbursement in respect of the aircraft object, appearson the list of States which qualify for the reduction of the minimum premium rates (“Cape Town
List”), and where applicable, in a territorial unit of that State that qualifies under Article 39 of
this Appendix, andc) The transaction relates to an aircraft object registered on the International Registry establishedpursuant to the Cape Town Convention, and the Aircraft Protocol thereto (Cape Town
Convention or CTC).
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37.
The reduction of the minimum premium rates established in accordance with sub-Section I
above shall not exceed 10% of the applicable minimum premium rate.
38.

In order to be included on the Cape Town List, a State shall:a) Be a Contracting Party to the Cape Town Convention;b) Have made the qualifying declarations set out in Annex I to this Appendix; andc) Have implemented the Cape Town Convention, including the qualifying declarations, in its laws
and regulations, as required, in such a way that the Cape Town Convention commitments areappropriately translated into national law.

39.

To qualify under Article 36 of this Appendix, a territorial unit shall:a) Be a territorial unit to which the Cape Town Convention has been extended;b) Be a territorial unit in respect of which the qualifying declarations set out in Annex I to thisAppendix apply; andc) Have implemented the Cape Town Convention, including the qualifying declarations, in its laws
and regulations, as required, in such a way that the Cape Town Convention commitments areappropriately translated into national law.

40.
An initial agreed Cape Town List shall be provided by the Participants to the Secretariat prior
to the entry into force of this Sector Understanding. Updates to the Cape Town List shall be made inaccordance with Articles 41 to 53 of this Appendix.
41.
Any Participant or non-Participant that provides official support for aircraft may propose to theSecretariat the addition of a State to the Cape Town List. Such proposal shall include, with respect to such
State:a) All the relevant information in respect of the date of deposit of the Cape Town Convention
ratification or accession instruments with the Depositary;b) A copy of the declarations made by the State which is proposed to be added to the Cape Town
List;c) All relevant information in respect of the date on which the Cape Town Convention and thequalifying declarations have entered into force;d) An analysis which outlines the steps that the State which is proposed to be added to the Cape
Town List has taken to implement the Cape Town Convention including the qualifying
declarations in its laws and regulations, as required to ensure that the Cape Town Convention
commitments are appropriately translated into national law; ande) A duly completed questionnaire, the form of which is attached at Annex 2 of this Appendix("CTC Questionnaire") completed by at least one law firm qualified to give legal advice inrelation to the relevant jurisdiction of the State which is proposed to be added to the Cape Town
List. The completed CTC Questionnaire shall specify:i)

The name(s) and office address(es) of the responding law firm(s);ii)

The law firm’s relevant experience, which could include experience in legislative andconstitutional processes as they relate to the implementation of international treaties in theState, and specific experience in CTC related issues including any experience in advisingeither a government on implementation and enforcement of the Cape Town Convention or
the private sector, or enforcement of creditor’s rights in the State which is proposed to be
added to the Cape Town List;

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iii)

Whether the law firm is involved or intends to be involved in any transactions that may
benefit from a reduction of minimum premium rates if the proposed State is added to the
CTC list4; andiv)

The date on which the CTC Questionnaire has been completed.

42.
The Secretariat shall circulate a message via electronic mail within five working days containing
the proposal.
43.
Any Participant or non-Participant which provides official support for aircraft may propose thata State be removed from the Cape Town List if they are of the view that such State has taken actions thatare inconsistent with, or failed to take actions that are required by virtue of, that State’s Cape Town
Convention commitments. To that end, the Participant or non-Participant shall include in a proposal for
removal from the Cape Town List, a full description of the circumstances that have given rise to the
proposal for deletion, such as any State actions that are inconsistent with its Cape Town Convention
commitments, or any failure to maintain or enforce legislation required by virtue of that State’s Cape
Town Convention commitments. The Participant or non-Participant who submits the proposal for removalfrom the Cape Town List shall provide any supporting documentation that may be available, and theSecretariat shall circulate a message via electronic mail within five working days containing suchproposal.
44.
Any Participant or non-Participant which provides official support for aircraft may propose thereinstatement of a State that has been previously removed from the Cape Town List, where suchreinstatement is justified by subsequent corrective actions or events. Such a proposal shall be accompanied
by a description of the circumstances that gave rise to the removal of the State as well as a report of thesubsequent corrective actions in support of reinstatement. The Secretariat shall circulate a message via
electronic mail within five working days containing such proposal.
45.
The Participants may either agree to or challenge a proposal brought forward under Articles 41
to 44 of this Appendix within 20 working days from the date of submission of the proposal (“Period 1”).
46.
If at the end of Period 1, and in the case of Article 43 of this Appendix unless the proposal has
been withdrawn by the proposing Participant or non-Participant providing evidence of corrective actions
or events, no challenge has been made to the proposal, the proposed update to the Cape Town List isdeemed to have been accepted by all Participants. The Secretariat will modify the Cape Town List
accordingly and send a message via electronic mail within five working days. The updated Cape Town
List shall take effect on the date of that message.
47.
In the event of a challenge to the proposed update of the Cape Town List, the challenging
Participant or Participants shall, within Period 1, provide a written explanation of the basis of thechallenge. Following circulation by the OECD Secretariat to all Participants of the written challenge, theParticipants shall make best efforts to come to an agreement within a further ten-working day period(“Period 2”).
48.
The Participants shall inform the Secretariat of the outcome of their discussions. If an agreement
is reached during Period 2, the Secretariat will, if necessary, update the Cape Town List accordingly andsend a message via electronic mail in the following five working days. The updated Cape Town List shalltake effect on the date of that message.
49.
If no agreement is reached during Period 2, the Chairman of the Participants to this Sector
Understanding (hereafter “the Chairman”) will make her/his best efforts to facilitate a consensus between
the Participants, within 20 working days (“Period 3”) immediately following Period 2. If at the end of
Period 3, no consensus is reached, a final resolution shall be achieved through the following procedures:

4

Together with information regarding any involvement (provided with due respect for confidentiality duties).

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78  TAD/PG(2023)7a) The Chairman shall make a written recommendation with respect to the proposed update of theCape Town List. The Chairman’s recommendation shall reflect the majority view emerging
from the views openly expressed by at least the Participants that provide official support for
aircraft exports. In the absence of a majority view, the Chairman shall make a recommendation
based exclusively on the views expressed by the Participants and shall set out in writing thebasis for the recommendation, including in the case of ineligibility, the eligibility criteria thatwere not met.
b) The Chairman’s recommendation shall not disclose any information relating to Participants’views or positions expressed in the context of the process set out in Articles 41 to 50 of thisAppendix, andc) The Participants shall accept the recommendation of the Chairman.
50.
If, following a proposal submitted under Article 41 of this Appendix, the Participants or
Chairman has determined that a State is not eligible to be added to the Cape Town List, a Participant or
non-Participant may submit another proposal requesting that the Participants reconsider the State’s
eligibility. The proposing Participant or non-Participant shall address the reasons substantiating theoriginal determination of ineligibility. The proposing Participant or non-Participant shall also obtain andprovide an updated CTC questionnaire. This new proposal shall be subject to the process set out in
Articles 45 to 51 of this Appendix.
51.
In the event of any change to the list of qualified countries pursuant to the procedures set out in
Article 49 of this Appendix, the Secretariat shall issue a message via electronic mail containing the
updated Cape Town List within five working days of such change. The updated Cape Town List shalltake effect on the date of that message.
52.
The addition, withdrawal or reinstatement of a State to the Cape Town List after disbursement
in respect of an aircraft shall not affect MPRs established regarding such aircraft.
53.
In the context of the process set out in Articles 41 to 51 of this Appendix, the Participants shallnot disclose any information relating to views or positions expressed.
54.
The Participants shall monitor the implementation of Articles 41 to 53 of this Appendix andreview it annually or upon the request of any Participant.
55.
For new and used aircraft, the following adjustments to the applicable minimum premium rates
may be applied:a) A discount of five basis points (per annum spreads) or 0.29% (up-front) to the applicableminimum premium rates may be applied for officially supported transactions in the form ofconditional insurance cover.
b) The minimum premium rates shall be applied on the covered principal amount.

III. NON ASSET-BACKED TRANSACTIONS
56.
Notwithstanding the provisions of Article 19 a) of this Appendix, the Participants may provide
officially supported export credits for non-asset backed transactions, provided either of the following
conditions is fulfilled:a) In the case of non-sovereign transactions:1) The maximum value of the export contract receiving official support is USD 15 million.
2) The maximum repayment term shall be 10 years,
3) No third party has a security interest in the assets being financed, andARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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4) A minimum surcharge of 30% shall be applied to the minimum premium rates establishedin accordance with sub-Section I above.
b) In the case of a transaction with a sovereign or backed by an irrevocable and unconditionalsovereign guarantee, a minimum surcharge shall, in accordance with Table 6 below, be applied
to the minimum premium rates set out in accordance with sub-Section I above.
Table 6
Risk Category

Surcharge (%)

1

0

2

0

3

0

4

10

5

15

6

15

7

25

8

25

57.
The provisions of Articles 36 to 52 of this Appendix do not apply to officially supported export
credits provided pursuant to Article 56 of this Appendix.

SECTION 3: MINIMUM PREMIUM RATES FOR GOODS AND SERVICES OTHER
THAN USED AIRCRAFT COVERED BY PART 3 OF THIS SECTOR UNDERSTANDING
58.
When providing official support for all goods and services other than used aircraft covered byPart 3 of this Sector Understanding, the minimum premium rates shall be as follows:a) In the case of asset-backed transactions, the minimum premium rates shall be equal to theprevailing minimum spreads established in accordance with sub-Section I above and, in the caseof pure cover, converted to upfront fees using the conversion model and the appropriate tenor.
b) In the case of non asset-backed transactions, the minimum premium rates shall be equal to theprevailing minimum spreads established in accordance with sub-Section I above to which asurcharge of 30% will be added, and, in the case of pure cover, converted to upfront fees using
the conversion model and the appropriate tenor.
59.
The provisions of Articles 36 to 52 of this Appendix shall apply to official support for asset
backed spare engines covered by Articles 20 a) and 20 c) of this Sector Understanding and support under
the first tiret of Article 21 a) 1) of this Sector Understanding.
60.
The provision of Article 55 of this Appendix shall also apply to official support for all goods
and services other than used aircraft covered by Part 3 of this Sector Understanding.

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ANNEX 1: QUALIFYING DECLARATIONS
1.
For the purpose of Section 2 of Appendix II, the term “qualifying declarations”, and all otherreferences thereto in this Sector Understanding, means that a Contracting party to the Cape Town
Convention (Contracting Party):a) Has made the declarations in Article 2 of this Annex, andb) Has not made the declarations in Article 3 of this Annex.
2.

The declarations for the purpose of Article 1 a) of this Annex are:a) Insolvency: State Party declares that it will apply the entirety of Alternative A under Article XIof the Aircraft Protocol to all types of insolvency proceeding and that the waiting period for the
purposes of Article XI (3) of that Alternative shall be no more than 60 calendar days.
b) Deregistration: State Party declares that it will apply Article XIII of the Aircraft Protocol.
c) Choice of Law: State Party declares that it will apply Article VIII of the Aircraft Protocol.
1. And at least one of the following (though both are encouraged):d) Method for Exercising Remedies: State Party declares under Convention Article 54 (2) that any
remedies available to the creditor under any provision of the Convention which are notexpressed under the relevant provisions thereof to require application to a court may be
exercised without leave of the court (the insertion “without court action and” to be recommended(but not required) before the words “leave of the court”);e) Timely Remedies: State Party declares that it will apply Article X of the Aircraft Protocol in its
entirety (though clause 5 thereof, which is to be encouraged, is not required) and that the numberof working days to be used for the purposes of the time-limit laid down in Article X (2) of the
Aircraft Protocol shall be in respect of:1) The remedies specified in Articles 13 (1) (a), (b) and (c) of the Convention (preservation of
the aircraft objects and their value; possession, control or custody of the aircraft objects; andimmobilisation of the aircraft objects), not more than that equal to ten calendar days, and
2) The remedies specified in Articles 13 (1) (d) and (e) of the Convention (lease or
management of the aircraft objects and the income thereof and sale and application ofproceeds from the aircraft equipment), not more than that equal to 30 calendar days.

3.

The declarations referred to in Article 1 b) of this Annex are the following:a) Relief Pending Final Determination: State Party shall not have made a declaration under
Article 55 of the Convention opting out of Article 13 or Article 43 of the Convention; provided,
however, that, if State Party made the declarations set out under Article 2 d) of this Annex, themaking of a declaration under Article 55 of the Convention shall not prevent application of theCape Town Convention discount.
b) Rome Convention: State Party shall not have made a declaration under Article XXXII of the
Aircraft Protocol opting out of Article XXIV of the Aircraft Protocol; andc) Lease Remedy: State Party shall not have made a declaration under Article 54 (1) of theConvention preventing lease as a remedy.

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4.
Regarding Article XI of the Aircraft Protocol, for Member States of the European Union, thequalifying declaration set out in Article 2 a) of this Annex shall be deemed made by a Member State, forpurposes hereof, if the national law of such Member State was amended to reflect the terms of Alternative
A under Article XI of the Aircraft Protocol (with a maximum 60 calendar days waiting period). As regards
the qualifying declarations set out in Articles 2 c) and e) of this Annex, these shall be deemed satisfied,
for the purpose of this Sector Understanding, if the laws of the European Union or the relevant Member
States are substantially similar to that set out in such Articles of this Annex. In the case of Article 2 c) of
this Annex, the laws of the European Union (EC Regulation 593/2008 on the Law Applicable toContractual Obligations) are agreed to be substantially similar to Article VIII of the Aircraft Protocol.

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ANNEX 2: CAPE TOWN CONVENTION QUESTIONNAIRE
I.

Preliminary Information

Please provide the following information:
1.

The name and full address of the law firm completing the questionnaire.

2.
The law firm’s relevant experience, which could include experience in legislative andconstitutional processes as they relate to the implementation of international treaties in the State, andspecific experience in CTC related issues including any experience in advising either a government on
implementation and enforcement of the Cape Town Convention or the private sector, or enforcement ofcreditor’s rights in the State which is proposed to be added to the Cape Town List.
3.
Whether the law firm is involved or intends to be involved in any transactions that may benefit
from a reduction of minimum premium rates if the proposed State is added to the CTC list.1
4.

The date on which this questionnaire was completed.

II.

Questions

1.

Qualifying declarations
1.1

Has the State2 made each of the qualifying declarations in accordance with the requirements ofAnnex 1 to Appendix II of the Sector Understanding on Export Credits for Civil Aircraft(“ASU”) (each a “Qualifying Declaration”)? In particular, regarding the declarations concerning“Method for Exercising Remedies” [Article 2 d)] and “Timely Remedies” [Article 2 e)], please
specify if one or both of these have been made.

1.2

Please describe the way in which the declarations made differ, if at all, from the requirements
referred to in Question 1.1.

1.3

Please confirm that the State has not made any of the declarations listed in Article 3 of Annex 1
to Appendix II of the ASU.

2.

1

Ratification
1.1

Has the State ratified, accepted, approved or acceded to the Cape Town Convention and AircraftProtocol (“Convention”)? Please could you state the date of ratification/accession and briefly
describe the State’s process of accession to or ratification of the Convention?

1.2

Do the Convention and Qualifying Declarations (“QD”) made have the force of law in the wholeterritory of the State without any further act, implementing legislation or the passing of any
further law or regulation?

1.3

If so, please briefly explain the process that gives the Convention and QDs the force of law.
Together with information regarding any involvement (provided with due respect for confidentiality duties).

For the purposes of this questionnaire the “State” is the country that is being proposed for addition to theCape Town Convention List under Appendix II, Section 2 II of the ASU. Where appropriate, these questions shallalso be answered in respect of the laws of the particular “territorial unit” of the State in which the relevant operatorof an aircraft [or other relevant body as set out in Article 35 (b) Appendix II] is located and “national law” shall beread as including a reference to the relevant local law.
2

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3.

Effect of national and local law
1.1

Describe and list, if applicable, the implementing legislation and regulation(s) with respect to
the Convention and each QD made by the State.

1.2

Would the Convention and QDs made, as translated into national law3 (“Convention and QDs”),
overrule or have priority over any conflicting national law, regulation, order, judicial precedentor regulatory practice. If so, please describe the process by which this happens,4 and if not,please provide details.

1.3

Are there any existing gaps in the implementation of the Convention and QDs? If so, please
describe.5

4.

Court and administrative decisions
1.1.

Please describe any matters, including judicial, regulatory, or administrative practice which
could be expected to result in the courts, authorities or administrative bodies failing to give fullforce and effect to the Convention and QDs.6,7

1.2.

To your knowledge, has there been any judicial or administrative enforcement action taken bya creditor under the Convention? If so, please describe the action and indicate whether it was
successful.

1.3.

To your knowledge, since ratification/implementation, have the courts in that State refused in
any instance to enforce loan obligations of a debtor or guarantor in the State contrary to theConvention and QDs?

1.4.

To your knowledge, are there any other matters that may impact whether courts andadministrative bodies should be expected to act in a manner consistent with the Convention and
QDs? If so, please specify.

3

For the purposes of this questionnaire, 'national law' refers to all national legislation of a State, including but
not limited to, the Constitution and its Amendments, any federal, state and district law or regulation.
4

For example, that (i) treaties prevail over other law as a matter of constitutional or similar framework law inState X, or (ii) legislation is required in State X, and has been enacted expressly setting out the priority of the Cape
Town Treaty and /or superseding such other law, or (iii) the Cape Town Treaty or its implementing legislation is(a) more specific than other law (lex specialis derogat legi generali), and/or (b) later in time than such other law (lexposterior derogat legi priori), and as a result of (a) and/or (b) prevails over such other law.
5

For example, is there any reason why the rights and remedies granted to creditors under the Convention,
including those granted under the QDs, would not (a) be recognised as being effective or (b) be sufficient bythemselves, to enable such rights and remedies to be validly exercised in the State?
6

An example of an administrative action for the purposes of this question might be the failure by the State toput in place any procedures or resources to give effect to a provision of the Convention or a Qualifying Declaration.
Another example would be the failure by a State to put in place proper procedures in its aircraft registry for recording
IDERAs.
7

Please include in your analysis any precedent / decision relating to the recognition of rights of creditors,
including ECAs, when relevant.

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APPENDIX IIIMINIMUM INTEREST RATESThe provision of official financing support shall not offset or compensate, in part or in full, for theappropriate premium rate to be charged for the risk of non-repayment pursuant to the provisions ofAppendix II.

1.

MINIMUM FLOATING INTEREST RATEa) The minimum floating interest rate shall be, as appropriate for the currency, the EURIBOR, theBank Bill Swap Rate, i.e. BBSY, the Canadian Dealer Offered Rate (CDOR) or the relevant risk
free rate (RFR) for the currency, including term RFRs, as specified by the currency’s benchmark
administrator (the ‘floating benchmark rate’). For certainty, for US dollars, the floating
benchmark rate shall be the Secured Overnight Financing Rate (SOFR). Where the floating
benchmark rate is an overnight rate, it shall be compounded daily during each interest periodusing generally accepted market conventions. Where the floating benchmark rate is a term rate,
it shall be the rate effective two business days prior to each interest period, with the maturity
that corresponds to the frequency of interest payment of the officially supported export credit.
A margin benchmark calculated in accordance with Article 8 of this Appendix, shall be added
to the floating benchmark rate.
b) When the repayment of principal and the payment of interest are combined in equal instalments,a rate based on either the swap rate or the term floating benchmark rate effective two businessdays prior to the loan drawdown date, shall be used to calculate the entire payment schedule, as
if it were a fixed rate, and the principal payment schedule shall then be fixed.
c) Where official financing support is provided for floating rate loans, buyers/borrowers may havethe option to switch from a floating rate to a fixed rate provided that the following conditions
are fulfilled:
1) The option is restricted to switching to the swap rate only;1
2) The option to switch shall only be exercised upon request, only once, and shall be reported
accordingly with a reference to the reporting form initially sent to the Secretariat pursuant
to Article 24 of this Understanding.

2.

MINIMUM FIXED INTEREST RATE

The minimum fixed interest rate shall be either:1

It being understood that when swapping from a LIBOR based floating rate loan to a SOFR based swap rateloan, the credit adjusted spread, as found on the SOFR Libor Basis curve, based on the weighted average life andcurrency of the loan, shall be added to the swap rate. (For USD on Bloomberg the SOFR Libor Basis curve is foundon page IRSB46)

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TAD/PG(2023)7  85a) The swap rate, concerning the relevant currency of the officially supported export credit andwith a maturity equal to the interpolated rate for the two closest available annual periods to theweighted average life of the loan. The interest rate shall be set two business days prior to eachdrawdown date.
ORb) The Commercial Interest Reference Rate (CIRR) established according to the provisions set out
in Articles 3 to 7 of this Appendix,
to which, in both cases, the margin benchmark, calculated in accordance with Article 8 f) of thisAppendix, shall be added.

3.

CONSTRUCTION OF CIRRa) A CIRR shall be published for the euro, the Japanese yen, the UK pound sterling, the US dollar
and, pending the submission of a request by an Interested Participant, any of the eligible
currencies set out in Article 9 of this Sector Understanding and calculated by adding a fixedmargin of 120 basis points to one of the following three yields (the base rates):
1) Five-year government bond yields for a repayment term up to and including nine years,
2) Seven-year government bond yields for over nine and up to and including 12 years, or3) Nine-year government bond yields for over 12 and up to and including 15 years.
b) CIRR shall be calculated monthly using data from the previous month and notified to theSecretariat, no later than five days after the end of each month. The Secretariat shall then inform
immediately all Participants of the applicable rates and make them publicly available. CIRR
shall take effect on the 15th day of each month.
c) A Participant or a non-Participant may request that a CIRR be established for the currency of a
non-Participant. In consultation with the non-Participant, a Participant or the Secretariat on
behalf of that non-Participant may make a proposal for the construction of the CIRR in thatcurrency using the Common Line procedures set out in Articles 28 to 33 of this Sector
Understanding.

4.

VALIDITY PERIOD OF CIRRa) Holding the CIRR: the CIRR applying to a transaction shall not be held for a period longer thansix months from its selection (export contract date or any application date thereafter) to thecredit agreement date. If the credit agreement is not signed within that limit, and the CIRR is
reset for an additional six months, the new CIRR shall be committed at the rate prevailing at thedate of reset.
b) After the credit agreement date, the CIRR shall be applied for drawing periods that do not exceed
six months. After the first six-month drawing period, the CIRR is reset for the next six months;
the new CIRR shall be the one prevailing at the first day of the new six-month period and cannot
be lower than the CIRR originally selected (procedure to be replicated for each subsequent
six-month period of drawings).

5.

APPLICATION OF MINIMUM INTEREST RATES

Within the provisions of the credit agreement the borrower shall not be allowed an option to switch froman officially supported floating rate financing to a pre-selected CIRR financing, nor be allowed to switch
between a pre-selected CIRR and the short term market rate quoted on any interest payment datethroughout the life of the loan.
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86  TAD/PG(2023)76.

EARLY REPAYMENT OF FIXED INTEREST RATE LOANS

In the event of a voluntary, early repayment of a fixed interest rate loan as determined in Article 2 of thisAppendix, or any portion thereof or when the CIRR applied under the credit agreement is modified into
a floating or a swap rate, the borrower shall compensate the institution providing official financing support
for all costs and losses incurred as a result of such actions, including the cost to the government institutionof replacing the part of the fixed rate cash inflow interrupted by the early repayment.

7.

IMMEDIATE CHANGES IN INTEREST RATESWhen market developments require the notification of an amendment to a CIRR during the course of amonth, the amended rate shall be implemented ten working days after notification of this amendment has
been received by the Secretariat.

8.

MARGIN BENCHMARKa) A SOFR margin benchmark shall be calculated monthly in accordance with paragraph b), using
data notified to the Secretariat in accordance with paragraph c), and shall take effect on the
15th day of each month. Once calculated, the margin benchmark shall be notified by the
Secretariat to the Participants and shall be made publicly available.
b) The SOFR margin benchmark shall be a rate equivalent to the average of the lowest 50% of themargins over: (i) SOFR (either the daily compounded SOFR calculated on a 3-month frequency
or a 3-month term SOFR, as appropriate) charged for floating rate transactions and (ii) SOFR
(either the daily compounded SOFR calculated on a 3-month frequency or a 3-month term
SOFR, as appropriate) as interpolated by swapping the fixed rate issuance to a floating rateequivalent charged for fixed rate transactions or capital market issuances. In either case, themargins included in the monthly benchmark reports submitted by relevant Participants shall bethose from the three full calendar months preceding the effective date set out in paragraph a)above. Transactions / issuances that are used in the calculation of the margin benchmark shallmeet the following conditions:
1) 100% unconditional guarantee transactions denominated in US dollars; and2) Official support provided in respect of aircraft valued at or above USD 35 million (or its
equivalent in any other eligible currency).
c) Participants shall report a margin at the time it becomes known and that margin will remain on
the Participant’s margin benchmark report for three full calendar months. In the case ofindividual transactions with multiple pricing events, there shall be no attempt to match
subsequent pricing events to ex post notifications.
d) Participants shall notify transactions as of the date on which the long-term margin is realised.
For bank mandated deals (including PEFCO), the date on which the margin is realised would
be the earliest of the following: (i) issuance of a final commitment by the Participant, (ii) settingof the margin post-commitment, (iii) loan drawdown, and (iv) setting of the long-term margin
post drawdown. In the case of several drawdowns occurring under the same bank mandate at
the same margin, notification shall only be made in respect of the first aircraft. For loans fundedby way of capital market issuance, the date on which the margin is realised shall be the date on
which the long term rate is set which is typically the bond issuance date. In the case of several
drawdowns occurring under the same bond and at the same margin, notification shall only bemade in respect of the first aircraft.
e) SOFR margin benchmark shall be applicable to a floating rate transaction and shall be set noearlier than the date of the final commitment and held for the duration of the final commitment.

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TAD/PG(2023)7  87f) For a fixed rate transaction, the margin benchmark applicable to the transaction shall be
determined by swapping the SOFR margin benchmark into an equivalent spread over theapplicable fixed rate, as determined in Article 2 of this Appendix, and be set no earlier than the
final commitment date and held for the duration of the final commitment.
g) For the period from 15 February 2022 to 14 July 2022, the margin benchmark shall be set at
30 basis points plus a credit adjusted spread of 26 basis points2 (the ‘transitional margin
benchmark’), for a total of 56 basis points, unless a SOFR margin benchmark can be calculated
in accordance with paragraph b) prior to 14 July 2022.
h) The Participants shall monitor the margin benchmark and shall review the margin benchmark
mechanism upon the request of any Participant.

2

Based on the Historical Credit Adjustment published by Bloomberg on March 5, 2021 for USD 3 months
YUS0003M Index at 0.26161

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APPENDIX IVREPORTING FORMa)Basic Information
1. Notifying country
2. Notification date
3. Name of notifying authority/agency
4. Identification numberb)Buyer/Borrower/Guarantor Information
5. Name and country of buyer
6. Name and country of borrower
7. Name and country of guarantor
8. Status of buyer/borrower/guarantor, e.g. sovereign, private bank, other private
9. Risk classification of buyer/borrower/guarantorc)Financial Terms and Conditions
10. In what form is official support provided, e.g. pure cover, official financing support
11. If official financing support is provided, is it a direct credit/refinancing/interest rate support
12.Description of the transaction supported, including the manufacturer, aircraft model and numberof aircraft.
13. Final commitment date
14. Currency of credit
15. Credit amount, according to the following scale in USD millions:Category

Credit Amount

I

0-200

II

200-400III

400-600IV

600-900V

900-1200VI

1200-1500

VII

1500-2000**
Indicate the number of USD 300 million multiples inexcess of USD 2 000 million.

16. Percentage of official support

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17. Repayment term
18. Repayment profile and frequency – including, where appropriate, weighted average life
19. Length of time between the starting point of credit and the first repayment of principal
20. Interest rates:- Minimum interest rate applied- Margin benchmark applied
21. Total premium charged by way of:- Up-front fees (in percentage of the credit amount) or- Spreads (basis points per annum above the applied interest rate)- As appropriate, please indicate separately the 15% surcharge applied in accordance with
Appendix II Article 20 b).
22. In the case of direct credit/financing, fees charged by way of:- Arrangement/Structuring fee- Commitment/Premium holding fee- Administration fee
23. Premium holding period
24. In the case of pure cover, premium holding fees
25. Transaction structuring terms: risk mitigants / premium surcharge applied
26.As appropriate, an indication of the impact of the Cape Town Convention on the premium rateappliedARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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APPENDIX V
LIST OF DEFINITIONSAll-In Cost Equivalence: the net present value of premium rates, interest rate costs and fees charged fora direct credit as a percentage of the direct credit amount is equal to the net present value of the sum ofpremium rates, interest rate costs and fees charged under pure cover as a percentage of the credit amountunder pure cover.
Asset-Backed: a transaction that meets the conditions set out in Article 19 a) of Appendix II.
Buyer/Borrower: includes (but is not limited to) commercial entities such as airlines and lessors, as well
as sovereign entities (or if a different entity, the primary source of repayment of the transaction).
Buyer Furnished Equipment: equipment furnished by the buyer and incorporated in the aircraft during
the manufacture/refurbishment process, on or before delivery, as evidenced by the Bill of Sale from the
manufacturer.
Cape Town Convention: refers to the Cape Town Convention on International Interests in Mobile
Equipment and the Protocol thereto on Matters specific to Aircraft Equipment.
Commitment: any statement, in whatever form, whereby the willingness or intention to provide official
support is communicated to the recipient country, the buyer, the borrower, the exporter or the financial
institution, including without limitation, eligibility letters, marketing letters.
Common Line: agreement of the Participants for a given transaction, or in special circumstances on
specific financial terms and conditions for official support; such common line shall prevail over the
relevant provisions of this Sector Understanding only for the transaction or in the circumstances specified
in the common line.
Conditional Insurance Cover: official support, which in the case of a default on payment for definedrisks provides indemnification to the beneficiary after a specified waiting period; during the waiting
period the beneficiary does not have the right to payment from the Participant. Payment under conditional
insurance cover is subject to the validity and the exceptions of the underlying documentation and of theunderlying transaction.
Conversion: A major change in the type design of an aircraft through its conversion into a different typeof aircraft (including the conversion of a passenger aircraft into a water bomber, cargo aircraft, search andrescue, surveillance aircraft, or business jet), subject to certification by the responsible Civil Aviation
Authority.
Country Risk Classification: the prevailing country risk classification of the Participants to the
Arrangement on Officially Supported Export Credits as published on the OECD website.
Credit Rating Agency: one of the internationally reputable rating agencies or any other rating agency
that is acceptable to the Participants.
Engine Kits: a set of parts introduced to improve reliability, durability and/or on-wing performanceprocurement through introduction of technology.

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Export Credit: an insurance, guarantee or financing arrangement which enables a foreign buyer ofexported goods and/or services to defer payment over a period of time; an export credit may take the formof a supplier credit extended by the exporter, or of a buyer credit, where the exporter’s bank or otherfinancial institution lends to the buyer (or its bank).
Final Commitment: a final commitment exists when the Participant commits to precise and complete
financial terms and conditions, either through a reciprocal agreement or by a unilateral act.
Firm Contract: an agreement between the manufacturer and the person taking delivery of the aircraft orengines as buyer, or, in connection with a sale-leaseback arrangement, as lessee under a lease with a termof at least five years, setting forth a binding commitment (excluding those relating to then unexercised
options), where non-performance entails legal liability.
Interested Participant: a Participant that (i) provides official support for airframe or aircraft enginescompletely or partially manufactured in its territory, (ii) has an existing substantial commercial interestor has experience with the buyer/borrower concerned, or (iii) has been requested by amanufacturer/exporter to provide official support to the buyer/borrower in question.
Interest Rate Support: can take the form of an arrangement between on the one hand a government, oran institution acting for or on behalf of a government and, on the other hand, banks or other financial
institutions which allows the provision of fixed rate export finance at or above the relevant minimum
fixed interest rate.
Major Modification/Refurbishing: operations of reconfiguration or upgrading of either a passenger or
cargo aircraft.
Net Price: the price for an item invoiced by the manufacturer or supplier thereof, after accounting for all
price discounts and other cash credits, less all other credits or concessions of any kind related or fairly
allocable thereto, as stated in a binding representation by each of the aircraft and engine manufacturers
the engine manufacturer representation is required only when it is relevant according to the form of thepurchase agreement - or service provider, as the case may be, and supported by documentation requiredby the provider of official support to confirm that net price. All import duties and taxes (e.g. VAT) are
not included in the net price.
New Aircraft: see Article 8 a) of this Sector Understanding.
Non-Asset-Backed: a transaction that does not meet the conditions set out in Article 19 a) of Appendix II.
Non-Sovereign Transaction: a transaction that does not meet the description set out in Article 57 b) of
Appendix II.
Premium Holding Period: subject to Article 36 b) of Appendix II, period(s) during which a premium
rate and related mandatory risk mitigants offered for a transaction are being maintained; not to exceed
18 months from the date it has been set until the final disbursement.
Premium Rate Conversion Model: model agreed by and made available to the Participants, to be used
for the purpose of this Sector Understanding in order to convert up-front premium fees into spreads andvice versa, in which the interest rate and the discount rate used shall be 4.6%; such rate shall be reviewed
regularly by the Participants.
Prior Notification: a notification made at least ten calendar days before issuing any commitment, using
the reporting form set out in Appendix IV.
Pure Cover: Official support provided by or on behalf of a government by a way of export credit
guarantee or insurance only, i.e. which does not benefit from official financing support.
Repayment Term: the period beginning at the Starting Point of Credit and ending on the contractual dateof the final repayment of principal.
Sovereign Transaction: a transaction that meets the description set out in Article 56 b) of Appendix II.
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Starting Point of Credit: for the sale of aircraft including helicopters, spare engines and parts, at thelatest the actual date when the buyer takes physical possession of the goods, or the weighted mean datewhen the buyer takes physical possession of the goods. For services, the latest starting point of credit isthe date of the submission of the invoices to the client or acceptance of service by the client.
Swap Rate: a fixed rate equal to the rate to swap floating rate debt to fixed rate debt (Offer side), posted
as the relevant currency’s Overnight Index Swap (OIS) curve, on any independent market index provider,such as Bloomberg, Reuters, or its equivalent, at 11:00 am New York time, two business days prior to theloan drawdown date.
Weighted Average Life: the time it takes to retire one-half of the principal of a credit; this is calculated
as the sum of time (in years) between the starting point of credit and each principal repayment weighted
by the portion of principal repaid at each repayment date.

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TAD/PG(2023)7  93

ANNEX IV: SECTOR UNDERSTANDING ON EXPORT CREDITS FORSHIPSCHAPTER I: GENERAL PROVISIONS1.

PURPOSEThe purpose of this Sector Understanding is to provide a framework for the orderly use of officially
supported export credits for the items specified in Article 4 below. The Sector Understanding seeks tofoster a level playing field for official support, as defined in Article 5 a), in order to encourage competition
among exporters based on quality and price of goods and services exported rather than on the mostfavourable officially supported financial terms and conditions.
The Participants to this Sector Understanding (the Participants) acknowledge that the provisions includedin this Sector Understanding have been developed for the sole purpose of this Sector Understanding andsuch provisions do not prejudice the other parts of the Arrangement on Officially Supported Export
Credits (the Arrangement) and their evolution.

2.

STATUSThe Sector Understanding is a Gentlemen’s Agreement among its Participants and is Annex IV to the
Arrangement; it forms an integral part of the Arrangement and it succeeds the Sector Understanding,which came into effect on 1 September 2011.

3.

PARTICIPATIONThe Participants to the Sector Understanding are: Australia, the European Union, Japan, Korea, New
Zealand and Norway.

4.

SCOPE OF APPLICATIONThis Sector Understanding sets out specific guidelines for officially supported export credits, which havea repayment term of two years or more, relating to export contracts of:a) Any new sea-going vessel of 100 gt and above used for the transportation of goods or persons,or for the performance of a specialised service (for example, fishing vessels, fish factory ships,
ice breakers and as dredgers, that present in a permanent way by their means of propulsion anddirection (steering) all the characteristics of self-navigability in the high sea), tugs of 365 kw
and over and to unfinished shells of ships that are afloat and mobile. The Sector Understanding
does not cover military vessels. Floating docks and mobile offshore units are not covered by the
Sector Understanding, but should problems arise in connection with export credits for such
structures, the Participants to the Sector Understanding (hereinafter the “Participants”), after
consideration of substantiated requests by any Participant, may decide that they shall be covered.

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Unclassified

94  TAD/PG(2023)7b) Any conversion of a ship. Ship conversion means any conversion of sea-going vessels of morethan 1 000 gt on condition that conversion operations entail radical alterations to the cargo plan,
the hull or the propulsion system.

5.

c) 1)

Although hovercraft-type vessels are not included in the Sector Understanding, Participants
are allowed to grant export credits for hovercraft vessels on equivalent conditions to thoseprevailing in the Sector Understanding. They commit themselves to apply this possibility
moderately and not to grant such credit conditions to hovercraft vessels in cases where it isestablished that no competition is offered under the conditions of the Sector Understanding.

2)

In the Sector Understanding, the term "hovercraft" is defined as follows: an amphibious
vehicle of at least 100 tons designed to be supported wholly by air expelled from the vehicle
forming a plenum contained within a flexible skirt around the periphery of the vehicle andthe ground or water surface beneath the vehicle, and capable of being propelled andcontrolled by airscrews or ducted air from fans or similar devices.

3)

It is understood that the granting of export credits at conditions equivalent to thoseprevailing in this Sector Understanding should be limited to those hovercraft vessels usedon maritime routes and non-land routes, except for reaching terminal facilities standing at
a maximum distance of one kilometre from the water.

OFFICIAL SUPPORTa) Official support may be provided in different forms:
1) Export credit guarantee or insurance (pure cover).
2) Official financing support:‒ direct credit/financing and refinancing, or‒ interest rate support.
3) Any combination of the above.
b) Official support shall not be provided if there is clear evidence that the contract has been
structured with a purchaser in a country which is not the final destination of the goods, primarily
with the aim of obtaining more favourable repayment terms.

6.

WITHDRAWAL

A Participant to this Sector Understanding may withdraw from it by notifying the Secretariat in writingby means of instant communication, e.g. using the electronic mail system that is maintained by the
Secretariat to facilitate communications amongst Participants and the Secretariat. The withdrawal takes
effect 180 calendar days after receipt of the notification by the Secretariat.

7.

MONITORINGThe Secretariat shall monitor the implementation of the Sector Understanding.

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TAD/PG(2023)7  95

CHAPTER II: FINANCIAL TERMS AND CONDITIONS FOR EXPORTS CREDITS

Financial terms and conditions for export credits supported under this Sector Understanding encompass
all the provisions set out in this Chapter which shall be read in conjunction one with the other. The Sector
Understanding sets out limitations on terms and conditions that may be officially supported. The
Participants recognise that more restrictive financial terms and conditions than those provided for by the
Sector Understanding traditionally apply to certain trade or industrial sectors. The Participants shallcontinue to respect such customary financial terms and conditions, in particular the principle by which
repayment terms do not exceed the useful life of the goods.

8.

MAXIMUM REPAYMENT TERM

The maximum repayment term is 12 years after delivery.

9.

CASH PAYMENTThe Participants shall require a minimum cash payment of 20% of the contract price by delivery.

10.

REPAYMENT OF PRINCIPAL AND PAYMENT OF INTERESTa) The principal sum of an export credit shall be repaid in equal instalments at regular intervals of
normally six months and a maximum of 12 months.
b) Interest shall be paid no less frequently than every six months and the first payment of interest
shall be made no later than six months after the starting point of credit normally at delivery.
c) For export credits provided in support of lease transactions, equal repayments of principal andinterest combined may be applied in lieu of equal repayments of principal as set out inparagraph a).
d) Interest due after the starting point of credit normally at delivery shall not be capitalised.
e) A Participant to this Sector Understanding intending to support a payment of interest on different
terms than those set out in paragraph b) shall give prior notification at least ten calendar days
before issuing any commitment, in accordance with Appendix I of this Sector Understanding.

11.

INTEREST RATES AND OTHER FEESInterest excludes:a) any payment by way of premium or other charge for insuring or guaranteeing supplier credits
or financial credits;b) any payment by way of banking fees or commissions relating to the export credit other thanannual or semi-annual bank charges that are payable throughout the repayment period; andc) withholding taxes imposed by the importing country.

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12.

VALIDITY PERIOD FOR EXPORT CREDITS

Financial terms and conditions for an individual export credit or line of credit, other than the validity
period for the Commercial Interest Reference Rates (CIRRs) set out in Article 17, shall not be fixed for aperiod exceeding six months prior to final commitment.

13.

ACTION TO AVOID OR MINIMISE LOSSES

This Sector Understanding does not prevent export credit authorities or financing institutions fromagreeing to less restrictive financial terms and conditions than those provided for by the Understanding,if such action is taken after the contract award (when the export credit agreement and ancillary documents
have already become effective) and is intended solely to avoid or minimise losses from events which
could give rise to non-payment or claims.

14.

MATCHING

Taking into account a Participant’s international obligations and consistent with the purpose of the thisUnderstanding, a Participant may match, according to the procedures set out in Article 24, financial terms
and conditions offered by a Participant or a non-Participant. Financial terms and conditions provided inaccordance with this Article are considered to be in conformity with the provisions of this Understanding.

15. MINIMUM FIXED INTEREST RATES UNDER OFFICIAL FINANCINGSUPPORT
The Participants providing official financing support for fixed rate loans shall apply the relevant CIRRs
as minimum interest rates. CIRRs are interest rates established according to the following principles:a) CIRRs should represent final commercial lending interest rates in the domestic market of thecurrency concerned;b) CIRRs should closely correspond to the rate for first class domestic borrowers;c) CIRRs should be based on the funding cost of fixed interest rate finance;d) CIRRs should not distort domestic competitive conditions; ande) CIRRs should closely correspond to a rate available to first class foreign borrowers.

16.

CONSTRUCTION OF CIRRsa) Each Participant wishing to establish a CIRR shall initially select one of the following two baserate systems for its national currency:
1) three-year government bond yields for a repayment term of up to and including five years;
five-year government bond yields for over five and up to and including eight and a half years;
and seven-year government bond yields for over eight and a half years; or2) five-year government bond yields for all maturities.
Exceptions to the base rate system shall be agreed by the Participants.

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TAD/PG(2023)7  97b) CIRRs shall be set at a fixed margin of 100 basis points above each Participant’s base rate unlessParticipants have agreed otherwise.
c) Other Participants shall use the CIRR set for a particular currency should they decide to financein that currency.
d) A Participant may change its base-rate system after giving six months’ advance notice and withthe counsel of the Participants.
e) A Participant or a non-Participant may request that a CIRR be established for the currency of a
non-Participant. In consultation with the interested non-Participant, a Participant or the
Secretariat on behalf of that non-Participant may make a proposal for the construction of the
CIRR in that currency using Common Line procedures in accordance with Articles 32 to 34.

17.

VALIDITY OF CIRRs

The interest rate applying to a transaction shall not be fixed for a period longer than 120 days. A marginof 20 basis points shall be added to the relevant CIRR if the terms and conditions of the official financing
support are fixed before the contract date.

18.

APPLICATION OF CIRRsa) Where official financing support is provided for floating rate loans, banks and other financing
institutions shall not be allowed to offer the option of the lower of either the CIRR (at time ofthe original contract) or the short-term market rate throughout the life of the loan.
b) In the event of a voluntary, early repayment of a loan of or any portion thereof, the borrower
shall compensate the government institution providing official financing support for all costs
and losses incurred as a result of such early repayment, including the cost to the government
institution of replacing the part of the fixed rate cash inflow interrupted by the early repayment.

19.

COMMUNICATION OF MINIMUM INTEREST RATESa) CIRRs for currencies that are determined according to articles 16, 17 and 18 shall be sent bymeans of instant communication at least monthly to the Secretariat for circulation to all
Participants.
b) Such notification shall reach the Secretariat no later than five days after the end of each monthcovered by this information. The Secretariat shall then inform immediately all Participants of
the applicable rates and make them publicly available.

20.

EFFECTIVE DATE FOR APPLICATION OF INTEREST RATES

Any changes in the CIRRs shall enter into effect on the fifteenth day after the end of each month.

21.

IMMEDIATE CHANGES IN INTEREST RATESWhen market developments require the notification of an amendment to a CIRR during the course of amonth, the amended rate shall be implemented ten days after notification of this amendment has been
received by the Secretariat.

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22.

PREMIUM FOR CREDIT RISKThe Participants shall charge premium, in addition to interest charges, to cover the risk of non-repaymentof export credits.

CHAPTER III: PROCEDURES

23.

INFORMATION ON OFFICIAL SUPPORTa) As soon as a Participant commits the official support which it has notified in accordance withthe procedures in Article 26, it shall inform all other Participants accordingly by including thenotification reference number on the relevant reporting form.
b) In an exchange of information in accordance with Articles 28 to 30, a Participant shall informthe other Participants of the credit terms and conditions that it envisages supporting for aparticular transaction and may request similar information from the other Participants.

24.

PROCEDURES FOR MATCHINGa) Before matching financial terms and conditions assumed to be offered by a Participant or a
non-Participant pursuant to Article 14, a Participant shall make every reasonable effort,
including as appropriate by use of the face to face consultations described in Article 30 to verify
that these terms and conditions are officially supported and shall comply with the following:1) The Participant shall notify all other Participants of the terms and conditions it intends tosupport following the same notification procedures required for the matched terms andconditions. In the case of matching a non-Participant, the matching Participant shall follow
the same notification procedures that would have been required had the matched terms beenoffered by a Participant.
2) Notwithstanding sub-paragraph 1) above, if the applicable notification procedure would
require the matching Participant to withhold its commitment beyond the final bid closing
date, then the matching Participant shall give notice of its intention to match as early as
possible.
3) If the initiating Participant moderates or withdraws its intention to support the notified terms
and conditions, it shall immediately inform all other Participants accordingly.
b) A Participant intending to offer identical financial terms and conditions to those notified
according to Article 26 may do so once the waiting period stipulated therein has expired. This
Participant shall give notification of its intention as early as possible.

25.

SPECIAL CONSULTATIONSa) A Participant that has reasonable grounds to believe that financial terms and conditions offeredby another Participant (the initiating Participant) are more generous than those provided for inthis Sector Understanding shall inform the Secretariat; the Secretariat shall immediately makeavailable such information.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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TAD/PG(2023)7  99b) The initiating Participant shall clarify the financial terms and conditions of its offer within two
working days following the issue of the information from the Secretariat.
c) Following clarification by the initiating Participant, any Participant may request that a special
consultation meeting of the Participants be organised by the Secretariat within five working days
to discuss the issue.
d) Pending the outcome of the special consultation meeting of the Participants, financial terms andconditions benefiting from official support shall not become effective.

26.

PRIOR NOTIFICATIONa) A Participant shall, in accordance with Appendix I, notify all other Participants at least ten
calendar days before issuing any commitment with a credit value of greater than SDR 2 million
if it intends to provide support in accordance with Article 10 e).
b) If the initiating Participant moderates or withdraws its intention to provide support for suchtransaction, it shall immediately inform all other Participants.

27.

CONTACT POINTSAll communications shall be made between the designated contact points in each country by means of
instant communication, e.g. electronic mail, and shall be treated in confidence.

28.

SCOPE OF ENQUIRIESa) A Participant may ask another Participant about the attitude it takes with respect to a third
country, an institution in a third country or a particular method of doing business.
b) A Participant that has received an application for official support may address an enquiry toanother Participant, giving the most favourable credit terms and conditions that the enquiring
Participant would be willing to support.
c) If an enquiry is made to more than one Participant, it shall contain a list of addressees.
d) A copy of all enquiries shall be sent to the Secretariat.

29.

SCOPE OF RESPONSESa) The Participant to which an enquiry is addressed shall respond within seven calendar days andprovide as much information as possible. The reply shall include the best indication that theParticipant can give of the decision it is likely to take. If necessary, the full reply shall follow assoon as possible. Copies shall be sent to the other addressees of the enquiry and to theSecretariat.
b) If an answer to an enquiry subsequently becomes invalid for any reason, because for example:‒ an application has been made, changed or withdrawn, or‒ other terms are being considered,a reply shall be made without delay and copied to all other addressees of the enquiry and to theSecretariat.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
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100  TAD/PG(2023)730.

FACE-TO-FACE CONSULTATIONSa) A Participant shall agree within ten working days to requests for face-to-face consultations.
b) A request for face-to-face consultations shall be made available to Participants andnon-Participants. The consultations shall take place as soon as possible after the expiry of theten working-day period.
c) The Chairman of the Participants shall co-ordinate with the Secretariat on any necessary follow
up action, e.g. a Common Line. The Secretariat shall promptly make available the outcome of
the consultation.

31.

PROCEDURES AND FORMAT OF COMMON LINESa) Common Line proposals are addressed only to the Secretariat. A proposal for a Common Lineshall be sent to all Participants. The identity of the initiator is not revealed on the Common Line
Register on the electronic Bulletin Board maintained by the Secretariat on the OECD Network
Environment. However, the Secretariat may orally reveal the identity of the initiator to a
Participant on demand. The Secretariat shall keep a record of such requests.
b) The Common Line proposal shall be dated and shall be in the following format:‒ Reference number, followed by “Common Line”.
‒ Name of the importing country and buyer.
‒ Name or description of the project as precise as possible to clearly identify the project.
‒ Terms and conditions foreseen by the initiating country.
‒ Common Line proposal.
‒ Nationality and names of known competing bidders.
‒ Commercial and financial bid closing date and tender number to the extent it is known.
‒ Other relevant information, including reasons for proposing the Common Line, availabilityof studies of the project and/or special circumstances.
c) The Secretariat shall make publicly available the agreed Common Lines.

32.

RESPONSES TO COMMON LINE PROPOSALSa) Responses shall be made within 20 calendar days, although the Participants are encouraged torespond to a Common Line proposal as quickly as possible.
b) A response may be a request for additional information, acceptance, and rejection, a proposal
for modification of the Common Line or an alternative Common Line proposal.
c) A Participant that advises that it has no position because it has not been approached by anexporter, or by the authorities in the recipient country in case of aid for the project, shall bedeemed to have accepted the Common Line proposal.
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TAD/PG(2023)7  101

33.

ACCEPTANCE OF COMMON LINESa) After a period of 20 calendar days, the Secretariat shall inform all Participants of the status of
the Common Line proposal. If not all Participants have accepted the Common Line, but noParticipant has rejected it, the proposal shall be left open for a further period of eight calendar
days.
b) After this further period, a Participant that has not explicitly rejected the Common Line proposal
shall be deemed to have accepted the Common Line. Nevertheless, a Participant, including theinitiating Participant, may make its acceptance of the Common Line conditional on the explicit
acceptance by one or more Participants.
c) If a Participant does not accept one or more elements of a Common Line it implicitly accepts
all other elements of the Common Line. It is understood that such a partial acceptance may leadother Participants to change their attitude towards a proposed Common Line. All Participants
are free to offer or match terms and conditions not covered by a Common Line.
d) A Common Line that has not been accepted may be reconsidered using the procedures in
Articles 31 and 33. In these circumstances, the Participants are not bound by their originaldecision.

34.

DISAGREEMENT ON COMMON LINES

If the initiating Participant and a Participant which has proposed a modification or alternative cannot agree
on a Common Line within the additional eight-calendar day period, this period can be extended by theirmutual consent. The Secretariat shall inform all Participants of any such extension.

35.

EFFECTIVE DATE OF COMMON LINEThe Secretariat shall inform all Participants either that the Common Line will go into effect or that it has
been rejected; the Common Line will take effect three calendar days after this announcement. The
Secretariat shall make available on the electronic bulletin board a permanently updated record of all
Common Lines that have been agreed or are undecided.

36.

VALIDITY OF COMMON LINESa) A Common Line, once agreed, shall be valid for a period of two years from its effective date,unless the Secretariat is informed that it is no longer of interest, and that this is accepted by all
Participants. A Common Line shall remain valid for a further two-year period if a Participant
seeks an extension within 14 calendar days of the original date of expiry. Subsequent extensions
may be agreed through the same procedure.
b) The Secretariat shall monitor the status of Common Lines and shall keep the Participants
informed accordingly, through the maintenance of the listing “The Status of Valid Common
Lines” on the electronic bulletin board. Accordingly, the Secretariat, inter alia, shall:‒ Add new Common Lines when these have been accepted by the Participants.
‒ Update the expiry date when a Participant requests an extension.
‒ Delete Common Lines that have expired.
‒ Issue, on a quarterly basis, a list of Common Lines due to expire in the following quarter.

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37.

OTHER NOTIFICATION

For the purpose of transparency each Participant shall, in addition to other transaction-level reporting
requirements, provide annually information on its system for the provision of official support and of themeans of implementation of this Sector Understanding, including the schemes in force.

38.

REVIEWa) The Sector Understanding shall be reviewed annually or upon request by any Participant within
the context of the Council Working Party on Shipbuilding (WP6), and a report made to theParticipants to the Arrangement.
b) To facilitate coherence and consistency between the Arrangement and this Sector Understanding
and taking into account the nature of the shipbuilding industry, the Participants to this Sector
Understanding and to the Arrangement will consult and co-ordinate as appropriate.
c) The Participants shall review the minimum interest rates.
‒ The Participants shall periodically review the system for setting CIRRs in order to ensurethat the notified rates reflect current market conditions and meet the aims underlying theestablishment of the rates in operation. Such reviews shall also cover the margin to be added
when these rates are applied.
‒ A Participant may submit to the Chairman of the Participants a substantiated request for an
extraordinary review in case this Participant considers that the CIRR for one or more than
one currency no longer reflect current market conditions.

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TAD/PG(2023)7  103

APPENDIX I
INFORMATION TO BE PROVIDED FOR NOTIFICATIONS
The information listed in a) to d) below shall be provided for all notifications made under this Sector
Understanding. In addition, the information specified in e) shall be provided, as appropriate, in relation to
the specific type of notification being made.
a) Basic Information
1.
2.
3.
4.

Notifying country
Date of notification
Notifying institution/authority/agency
ECA(s) extending official export credit support
a. ECA providing insurance/guarantee support
b. ECA providing finance support
5. Notification number
6. Identification codes (internal)
7. Credit line reference number (if relevant)
8. Status (e.g. original, revision, replacement)
9. Revision number (if relevant)
10. Article(s) of the Sector Understanding under which notification is being made11. Reference number of notification matched (if relevant)
12. Description of support being matched (if relevant)
13. Destination countryb) Buyer/Borrower/Guarantor Information
14. Buyer name
15. Buyer country
16. Buyer location (if known)
17. Buyer status
18. Buyer type
19. Borrower name (if the borrower is not the buyer)
20. Borrower country (if the borrower is not the buyer)
21. Borrower location (if the borrower is not the buyer)
22. Borrower status (if the borrower is not the buyer)
23. Borrower type (if the borrower is not the buyer)
24. Guarantor name (if relevant)
25. Guarantor country (if relevant)
26. Guarantor location (if relevant)
27. Guarantor status (if relevant)
28. Guarantor type (if relevant)c) Information on Goods and/or Services Being Exported and the Project
29. Detailed description of the products and/or services being exported
30. Detailed description of the project (or sector) for which the exports are being provided
31. Suggested purpose code
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104  TAD/PG(2023)7
32. Location of the project (if known)
33. Tender closing date (if relevant)
34. Expiry date of credit line (if relevant)
35. Value of contract(s) supported, according to the following scale in millions of SDRs:
Category

From

To

I:

0

1

II:

1

2

III:

2

3

IV:

3

5

V:

5

7

VI:

7

10

VII:

10

20

VIII:

20

40

IX:

40

80

X:

80

120

XI:

120

160

XII:

160

200

XIII:

200

240

XIV:

240

280

XV:

280

*

*
Indicate the number of SDR 40 million multiples in excess of
SDR 280 million, e.g. SDR 410 million would be notified as
Category XV+3.

36. Value of contract(s) supported, actual amount (in contract currency)
37. Currency of contract(s)d) Financial Terms and Conditions of the Official Export Credit Support
The following information should be provided in respect of each tranche supported fortransactions comprising multiple tranches with different financial terms and conditions.
38. Credit value, SDR scale
39. Credit value, actual amount (optional in lieu of item 38)
40. Credit currency
41. Cash payment (% export contract value)
42. SPOC normally at delivery determined according to (with reference to Appendix II
definition j)
43. Length of the repayment period
44. Length of repayment period units
45. Interest rate base
46. Interest rate or margin above base
47. Comments, notes and/or explanations regarding the information provided in a) to d).
e) Additional information to be provided, as appropriate, for notifications made in relation to
Chapter II Article 10 e)
48. Repayment profile
49. Repayment frequency (principal)
50. Repayment frequency (interest)
51. First principal repayment after SPOC normally at delivery
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52. Amount of interest capitalised before the SPOC normally at delivery
53. Capitalised interest currency
54. Weighted average life of the repayment period
55. Percentage principal repaid by mid-point of credit
56. Explanation of the reason for not providing support according to standard repayment
structures
57. Comments, notes and/or explanations regarding the information provided in e).

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APPENDIX II
LIST OF DEFINTIONS
For the purpose of this Understanding:a) Commitment: any statement, in whatever form, whereby the willingness or intention to provide
official support is communicated to the recipient country, the buyer, the borrower, the exporteror the financial institution.
b) Common Line: an understanding between the Participants to agree, for a given transaction orin special circumstances, on specific financial terms and conditions for official support. The
rules of an agreed Common Line supersede the rules of the Understanding only for thetransaction or in the circumstances specified in the Common Line.
c) Export Contract Value: the total amount to be paid by or on behalf of the purchaser for goods
and/or services exported, i.e. excluding local costs as defined hereafter; in the case of a lease, it
excludes the portion of the lease payment that is equivalent to interest.
d) Final Commitment: for an export credit transaction (either in the form of a single transaction
or a line of credit), a final commitment exists when the Participant commits to precise andcomplete financial terms and conditions, either through a reciprocal agreement or by a unilateralact.
e) Interest Rate Support: an arrangement between a government and banks or other financial
institutions which allows the provision of fixed rate export finance at or above the CIRR.
f) Line of Credit: a framework, in whatever form, for export credits that covers a series oftransactions which may or may not be linked to a specific project.
g) Local Costs: expenditure for goods and services in the buyer's country that are necessary either
for executing the exporter's contract or for completing the project of which the exporter's
contract forms a part. These exclude commission payable to the exporter's agent in the buying
country.
h) Pure Cover: official support provided by or on behalf of a government by way of export credit
guarantee or insurance only, i.e. which does not benefit from official financing support.
i) Repayment Term: the period beginning at the starting point of credit normally at delivery, as
defined in this Appendix, and ending on the contractual date of the final repayment of principal.
j) Starting Point of Credit:
1)

Parts or components (intermediate goods) including related services: in the case of parts
or components, the starting point of credit is not later than the actual date of acceptance ofthe goods or the weighted mean date of acceptance of the goods (including services, if
applicable) by the buyer or, for services, the date of the submission of the invoices to theclient or acceptance of services by the client.
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2)

Quasi-capital goods, including related services - machinery or equipment, generally of
relatively low unit value, intended to be used in an industrial process or for productive orcommercial use: in the case of quasi-capital goods, the starting point of credit is not later
than the actual date of acceptance of the goods or the weighted mean date of acceptance ofthe goods by the buyer or, if the exporter has responsibilities for commissioning, then thelatest starting point is at commissioning, or for services, the date of the submission of theinvoices to the client or acceptance of the service by the client. In the case of a contract forthe supply of services where the supplier has responsibility for commissioning, the latest
starting point is commissioning.

3)

Capital goods and project services - machinery or equipment of high value intended to be
used in an industrial process or for productive or commercial use:

4)−

In the case of a contract for the sale of capital goods consisting of individual items
usable in themselves, the latest starting point is the actual date when the buyer takes
physical possession of the goods, or the weighted mean date when the buyer takes
physical possession of the goods.

−

In the case of a contract for the sale of capital equipment for complete plant or factories
where the supplier has no responsibility for commissioning, the latest starting point isthe date at which the buyer is to take physical possession of the entire equipment(excluding spare parts) supplied under the contract.

−

If the exporter has responsibility for commissioning, the latest starting point is atcommissioning.

−

For services, the latest starting point of credit is the date of the submission of theinvoices to the client or acceptance of service by the client. In the case of a contract
for the supply of services where the supplier has responsibility for commissioning, thelatest starting point is commissioning.

Complete plants or factories – complete productive units of high value requiring the use ofcapital goods:−

In the case of a contract for the sale of capital equipment for complete plant or factories
where the supplier has no responsibility for commissioning, the latest starting point ofcredit is the date when the buyer takes physical possession of the entire equipment(excluding spare parts) supplied under the contract.

−

In case of construction contracts where the contractor has no responsibility forcommissioning, the latest starting point is the date when construction has been
completed.

−In the case of any contract where the supplier or contractor has a contractual
responsibility for commissioning, the latest starting point is the date when it hascompleted installation or construction and preliminary tests to ensure it is ready for
operation. This applies whether or not it is handed over to the buyer at that time inaccordance with the terms of the contract and irrespective of any continuingcommitment which the supplier or contractor may have, e.g. for guaranteeing its
effective functioning or training local personnel.

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108  TAD/PG(2023)7−

Where the contract involves the separate execution of individual parts of a project, thedate of the latest starting point is the date of the starting point for each separate part,or the mean date of those starting points, or, where the supplier has a contract, not for
the whole project but for an essential part of it, the starting point may be thatappropriate to the project as a whole.

−

For services, the latest starting point of credit is the date of the submission of theinvoices to the client or the acceptance of service by the client. In the case of a contract
for the supply of services where the supplier has responsibility for commissioning, thelatest starting point is commissioning.

k) Weighted Average Life of the Repayment Period: the time that it takes to retire one-half ofthe principal of a credit. This is calculated as the sum of time (in years) between the starting
point of credit normally at delivery and each principal repayment weighted by the portion ofprincipal repaid at each repayment date.

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ATTACHMENT: COMMITMENTS FOR FUTURE WORKThe Participants to this Sector Understanding agree:a) To develop an illustrative list of types of ships which are generally considered
non-commercially viable, taking into account the disciplines on tied aid set out in the
Arrangement.
b) To review the provisions of the Arrangement in relation to minimum premium benchmarks witha view to incorporating them into this Sector Understanding.
c) To discuss, subject to the developments in relevant international negotiations, the inclusion ofother disciplines on minimum interest rates including a special CIRR and floating rates.
d) To review the applicability to this Sector Understanding of provisions of the Arrangement inrelation to Project Finance.
e) To discuss whether:‒ the date of the first instalment of principal;‒ the Weighted Average Life concept
may be used in relation to the repayment profile contained in Article 10 of this Sector
Understanding.

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ANNEX V: INFORMATION TO BE PROVIDED FOR NOTIFICATIONS

The information listed in Section I below shall be provided for all notifications made under the
Arrangement (including its Annexes). In addition, the information specified in Section II shall be
provided, as appropriate, in relation to the specific type of notification being made.

I.

INFORMATION TO BE PROVIDED FOR ALL NOTIFICATIONSa) Basic Information
1.
2.
3.
4.

Notifying country
Date of notification
Notifying institution/authority/agency
ECA(s) extending official export credit support
a. ECA providing insurance/guarantee support
b. ECA providing finance support
5. Notification number
6. Identification codes (internal)
7. Credit line reference number (if relevant)
8. Status (e.g. original, revision, replacement)
9. Revision number (if relevant)
10. Arrangement Article(s) under which notification is being made11. Reference number of notification matched (if relevant)
12. Description of support being matched (if relevant)
13. Destination countryb) Buyer/Borrower/Guarantor Information
14. Buyer name
15. Buyer country
16. Buyer location (if known)
17. Buyer status
18. Buyer type
19. Borrower name (if the borrower is not the buyer)
20. Borrower country (if the borrower is not the buyer)
21. Borrower location (if the borrower is not the buyer)
22. Borrower status (if the borrower is not the buyer)
23. Borrower type (if the borrower is not the buyer)
24. Guarantor name (if relevant)
25. Guarantor country (if relevant)
26. Guarantor location (if relevant)
27. Guarantor status (if relevant)
28. Guarantor type (if relevant)

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TAD/PG(2023)7  111c) Information on Goods and/or Services Being Exported and the Project
29. Detailed description of the products and/or services being exported
30. Detailed description of the project (or sector) for which the exports are being provided
31. Suggested purpose code
32. Location of the project (if known)
33. Tender closing date (if relevant)
34. Expiry date of credit line (if relevant)
35. Value of contract(s) supported, according to the following scale in millions of SDRs:
Category

From

To

I:

0

1

II:

1

2

III:

2

3

IV:

3

5

V:

5

7

VI:

7

10

VII:

10

20

VIII:

20

40

IX:

40

80

X:

80

120

XI:

120

160

XII:

160

200

XIII:

200

240

XIV:

240

280

XV:

280

*

*
Indicate the number of SDR 40 million multiples in excess of
SDR 280 million, e.g. SDR 410 million would be notified as
Category XV+3.

36. Value of contract(s) supported, actual amount (in contract currency)
37. Currency of contract(s)d) Financial Terms and Conditions of the Official Export Credit Support
The following information should be provided in respect of each tranche supported fortransactions comprising multiple tranches with different financial terms and conditions.
38. Credit value, SDR scale
39. Credit value, actual amount (optional in lieu of item 38)
40. Credit currency
41. Down payment (% export contract value)
42. Local Costs (% export contract value)
43. SPOC determined according to (with reference to Annex XIII definition u)
44. Length of the repayment term
45. Length of repayment term units
46. Interest rate base
47. Interest rate or margin above base
48. Comments, notes and/or explanations regarding the information provided in Section I

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II.

ADDITIONAL INFORMATION TO BE PROVIDED, AS APPROPRIATE, FOR
NOTIFICATIONS MADE IN RELATION TO SPECIFIC PROVISIONSa) Chapter II Article 11 d) 3)
The following information should be provided in respect of each tranche supported fortransactions comprising multiple tranches with different financial terms and conditions.
49. Type of local costs supported
50. Nature of local costs supported: Capital equipment?
51. Nature of local costs supported: Deliveries from local subsidiaries and/or affiliates?
52. Nature of local costs supported: Local construction or installation costs?
53. Nature of local costs supported: VAT, import duties, other taxes?
54. Nature of local costs supported: Other?
55. Description of "other" local costs
56. Comments, notes and/or explanations regarding the information provided in Section II a).
b) Chapter II Article 13 f), Annex I Article 6 a), Annex II Article 6 a)
57. Repayment profile
58. Repayment frequency (principal)
59. Repayment frequency (interest)
60. First principal repayment after SPOC
61. First principal repayment after SPOC units
62. Amount of interest capitalised before the SPOC
63. Capitalised interest currency
64. Weighted average life of the repayment period
65. Percentage principal repaid by mid-point of credit
66. maximum single instalment (% of credit)
67. Explanation of the reasons why there is an imbalance between the timing of funds available
to the obligor and the debt service profile permitted according to either (as relevant)
Articles 13 a) and 13 b), Articles 3 a) and 3 b) of Annex II, or Articles 5 a) and 5 b) of
Annex IV.
68. For transactions with a repayment profile that does not match the free cash flow, a detailed
and adequate justification of the repayment profile supported.
69. Comments, notes and/or explanations regarding the information provided in Section II b).
c) All notification obligations in Chapter II Articles 21, 24, 26, and 27.
70. Country risk classification of the obligor’s country
71. Application of an offshore future flow structure combined with an offshore escrowaccount? (Categories 1-7 only)
72. The applicable country and buyer risk categories are related to the (buyer, borrower,
guarantor, project, transaction)
73. Applicable country risk classification
74. Applicable buyer risk category
75. Does the entity indicated in item 72 have a foreign currency rating from an accredited credit
rating agency (CRA)?
76. Most favourable accredited CRA foreign currency rating for the entity indicated in item 72
77. Accredited CRA providing the rating reported in item 76
78. Basis for applicable Minimum Premium Rate (MPR)
79. Basis for actual premium rate charged
80. Comments, notes and/or explanations regarding the basis for the actual premium rate
charged81. Length of the drawdown period
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TAD/PG(2023)7  113

82. Length of drawdown period units
83. Percentage of cover for political (country) risk
84. Percentage of cover for commercial (buyer) risk
85. Official export credit product86. Interest covered during claims waiting period?
87. MPR (based on item 78) country risk mitigation or buyer risk credit enhancements
88. Local currency financing? (Cat 1-7 MPRs only)
89. Local currency factor (LCF) applied
90. Buyer risk credit enhancements?
91. Total credit enhancement factor (CEF) applied
92. Applicable MPR (based on item 78) after any country risk mitigation or buyer risk credit
enhancements
93. Actual premium rate charged
94. Comments, notes and/or explanations regarding the information provided in Section II c).
d) Arrangement, Article 24 e) first tiret
95. Explanation of the characteristics of the obligor against the criteria for Buyer Risk Category
CC0 in Annex X of the Arrangemente) Arrangement, Article 24 e) second tiret
96. Rationale for buyer risk category better than accredited CRA ratingf) Arrangement, Article 21 c) 2) first tiret
97. Type of name-specific or related entity debt instrument used to set premium
98. Name of the debt instrument entity
99. Detailed description and key characteristics of the debt instrument and the methodology
used to derive the pricing, including (but not limited to) information about the tenor, credit
profile, liquidity and currency of the instrument
100. Relationship between the transaction obligor/guarantor and the related entity
101.Does the transaction obligor/guarantor have the same issuer CRA rating as the related
entity?
102. Does the related entity meet all of the criteria listed in Annex XIII (definition "s") of the
Arrangement?
103. Detailed explanation of how the criteria that define a related entity have been metg) Arrangement, Article 21 c) 2) second tiret
104. Justification for the buyer risk classification
105. Best accredited CRA foreign currency rating for the sovereign in the obligor’s/guarantor’s
domicile (If the applicable buyer risk category is more favourable than the best accredited
CRA rating of the sovereign in the obligor’s/guarantor’s domicile for an unrated obligor)
106. Accredited CRA providing the rating reported in item104h) Arrangement, Article 21 c) 1)
107. Is syndicated loan package structured as either an asset-backed or project financetransaction?
108. Do commercial market loans/guarantees without any bilateral or multilateral support
comprise at least 25% of the syndicate?
109. Are all parties to the financing on pari passu terms on all financial terms and conditions,
including the security package?
110. Are the financial terms and conditions of the transaction fully compliant with the
Arrangement, as modified by the provisions for Market Benchmark pricing in syndicatedloans/guarantees transactions?

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114  TAD/PG(2023)7
111. Detailed description of the methodology used to derive the premium (or all-in cost for direct
lending) reported in item 93
112. Comments, notes and/or explanations regarding the information provided in Section II h).
i) Arrangement, Article 21 h)
113. Does the guarantee cover the entire duration of the debt?
114. Is the guarantee irrevocable, unconditional and available on demand?
115. Is the guarantee legally valid and capable of being enforced in the guarantor country's
jurisdiction?
116. Is the guarantor creditworthy in relation to the size of the guaranteed debt?
117. Is the guarantor subject to the monetary control and transfer regulations of the country inwhich it is located?
118. Percentage of the total amount at risk (i.e. principal and interest) that is covered by theguarantee
119. Does any financial relationship exist between the guarantor and the obligor?
120. Type of relationship
121.Is the guarantor legally and financially independent and can it fulfil the obligor’s payment
obligation?
122. Would the guarantor be affected by events, regulations or sovereign intervention in the
obligor’s country?
123. Comments, notes and/or explanations regarding the information provided in Section II i).
j) Arrangement, Article 26 b)
For the application of an offshore future flow structure combined with an offshore escrowaccount:
124. - 134. Confirmation that the criteria listed in Annex X have been met
135. Information on additional factors taken into consideration and/or any other comments
regarding the application of an offshore future flow structure combined with an offshore
escrow accountFor local currency financing:
136. - 141. Confirmation that the criteria listed in Annex X have been met
142. Local currency used
143. Information on additional factors taken into consideration and/or any other comments
regarding the application of local currency financing
144. Comments, notes and/or explanations regarding the information provided in Section II j).
k) Arrangement, Article 27 d)
145. –152. The specific buyer risk credit enhancements and corresponding credit enhancement
factors applied
153. Comments, notes and/or explanations regarding the information provided in Section II k).
l) Arrangement, Articles 45 and 46
154.Total amount of trade-related aid, SDR scale
155.Composition of trade-related aid package: share of non-concessional export credits inconformity with the Arrangement
156.Composition of trade-related aid package: share of other funds at or near market rates
157.Composition of trade-related aid package: share of other official funds with aconcessionality level of less than the minimum permitted under Article 33 except in casesof matching
158.Composition of trade-related aid package: share of down payment from the purchaser

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159.Composition of trade-related aid package: share of payments on or before the starting pointof credit that are not considered
160.Composition of trade-related aid package: share of grants
161.Composition of trade-related aid package: share of concessional credits
162.Terms and conditions of concessional credits: grace period
163.Terms and conditions of concessional credits: length of repayment period
164.Terms and conditions of concessional credits: repayment frequency
165.Terms and conditions of concessional credits: repayment profile
166.Terms and conditions of concessional credits: currency
167.Terms and conditions of concessional credits: interest rate
168.Terms and conditions of concessional credits: applicable DDR
169.Terms and conditions of concessional credits: concessionality level
170.Overall concessionality level of the trade-related aid package
171.Comments, notes and/or explanations regarding the information provided in Section II l).

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ANNEX VI: CALCULATION OF THE MINIMUM PREMIUM RATESFOR COUNTRY RISK CATEGORY 1-7 TRANSACTIONSMPR Formula
The formula for calculating the applicable MPR for an export credit involving an obligor/guarantor in acountry classified in Country Risk Categories 1-7 is:
MPR = { [ (ai * HOR + bi) * max (PCC, PCP) / 0.95 ] * (1-LCF) + [cin * PCC / 0.95 * HOR * (1-CEF)] }* QPFi * PCFi *BTSF * (1- min (TERM, 0.15))
where:
•
•
•
•
•
•
•
•
•
•
•
•

ai = country risk coefficient in country risk category i (i = 1-7)
cin = buyer risk coefficient for buyer category n (n = SOV+, SOV/CCO, CC1-CC5) in country
risk category i (i = 1-7)
bi = constant for country category risk category i (i = 1-7)
HOR = horizon of risk
PCC = commercial (buyer) risk percentage of cover
PCP = political (country) risk percentage of cover
CEF = credit enhancements factor
QPFi = quality of product factor in country risk category i (i = 1-7)
PCFi = percentage of cover factor in country risk category i (i = 1-7)
BTSF = better than sovereign factor
LCF = local currency factor
TERM = term adjustment factor

Applicable Country Risk Classification
The applicable country risk classification is determined according to Article 21 e) of the Arrangement,
which in turn determines the country risk coefficient (ai) and constant (bi) that are obtained from thefollowing table:
1

2

3

4

5

6

7

a

0.090

0.200

0.350

0.550

0.740

0.900

1.100

b

0.350

0.350

0.350

0.350

0.750

1.200

1.800

Selection of the Appropriate Buyer Risk Category
The appropriate buyer risk category is selected from the following table, which provides the combinationsof country and buyer risk categories that have been established and the agreed concordance between buyer
risk categories CC1-CC5 and the classifications of accredited CRAs. Qualitative descriptions of eachbuyer risk category (SOV+ to CC5) have been established to facilitate the classification of obligors (andguarantors) and are provided in Annex X.

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TAD/PG(2023)7  117
Country Risk Category
1

2

3

4

5

6

7

SOV+

SOV+

SOV+

SOV+

SOV+

SOV+

SOV+

SOV / CC0

SOV / CC0

SOV / CC0

SOV / CC0

SOV / CC0

SOV / CC0

SOV / CC0

CC1
AAA to AA-

CC1
A+ to A-CC1
BBB+ to BBB-

CC1
BB+ to BB

CC1
BB-

CC1
B+

CC1
B

CC2
A+ to A-CC2
BBB+ to BBB-

CC2
BB+ to BB

CC2
BB-

CC2
B+

CC2
B

CC2
B- or worse

CC3
BBB+ to BBB-

CC3
BB+ to BB

CC3
BB-

CC3
B+

CC3
B

CC3
B- or worse

CC4
BB+ to BB

CC4
BB-

CC4
B+

CC4
B

CC4
B- or worse

CC5
BB- or worse

CC5
B+ or worse

CC5
B or worse

CC5
B- or worse

The selected buyer risk category, in combination with the applicable country risk category determines thebuyer risk coefficient (cin) that is obtained from the following table:
Country Risk Category

Buyer Risk
Category

1

2

3

4

5

6

7

SOV+

0.000

0.000

0.000

0.000

0.000

0.000

0.000

SOV / CC0

0.000

0.000

0.000

0.000

0.000

0.000

0.000

CC1

0.110

0.120

0.110

0.100

0.100

0.100

0.125

CC2

0.200

0.212

0.223

0.234

0.246

0.258

0.271

CC3

0.270

0.320

0.320

0.350

0.380

0.480

n/a

CC4

0.405

0.459

0.495

0.540

0.621

n/a

n/a

CC5

0.630

0.675

0.720

0.810

n/a

n/a

n/a

Horizon of Risk (HOR)
The Horizon of Risk (HOR) is calculated as follows:
For standard repayment profiles (i.e. equal semi-annual repayments of principal):
HOR = (length of the disbursement period * 0.5) + the length of the repayment period
For non-standard repayment profiles:
HOR = (length of the disbursement period * 0.5) + (weighted average life of the repayment period- 0.25) / 0.5
In the above formulas, the unit of measurement for time is years.

Percentage of Cover for Commercial (Buyer) Risk (PCC) and Political (Country)
Risk (PCP)The Percentages of Cover (PCC and PCP) expressed as a decimal value (i.e. 95% is expressed as 0.95) in
the MPR formula.

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Buyer Risk Credit Enhancements
The value of the credit enhancement factor (CEF) is 0 for any transaction that is not subject to any buyer
risk credit enhancements. The value of the CEF for transactions that are subject to buyer risk credit
enhancements is determined according to Annex X, subject to the restrictions set out in Article 27 c) of
the Arrangement and may not exceed 0.35.

Quality of Product Factor (QPF)
The QPF is obtained from the following table:
Country Risk Category
Product Quality
1

2

3

4

5

6

7

Below Standard

0.99650.99350.98500.98250.98250.98000.9800Standard

1.00001.00001.00001.00001.00001.00001.0000Above Standard

1.00351.00651.01501.01751.01751.02001.0200Percentage of Cover Factor (PCF)
The PCF is determined as follows:
For ( max(PCC, PCP) ≤ 0.95, PCF = 1)
For ( max(PCC, PCP) > 0.95, PCF = 1 + ( ( max(PCC, PCP) - 0.95) / 0.05 ) * ( percentage of covercoefficient )The percentage of cover coefficient is obtained from the following table:
Country Risk Category

Percentage of cover coefficient

1

2

3

4

5

6

7

0.00000

0.003370.004890.016390.03657

0.058780.08598

Better than Sovereign Factor (BTSF)
When an obligor is classified in the “better than sovereign” (SOV+) buyer risk category, BTSF = 0.9,
otherwise BTSF = 1.

Local Currency Factor (LCF)
For transaction making use of local currency country risk mitigation, the value of the LCF may not exceed
0.2. The value of the LCF for all other transactions is 0.

Term Adjustment Factor (TERM)
The Term Adjustment Factor (TERM) may only be applied for obligors that a Participant classifies inbuyer risk categories equivalent to speculative grade (CRA rating equivalent of BB+ or worse) according
to the concordance table in this Annex, including Buyer categories SOV+ and SOV/CC0 in country risk
categories 5-7 and for transactions where the Horizon of risk (HOR) is greater than 10 years. In such acase, TERM = 0.018 * (HOR - 10). This adjustment is capped and may not exceed 15%.

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ANNEX VII: PREMIUM BENCHMARKS FOR
MARKET BENCHMARK TRANSACTIONS

Un-covered Tranche of Export Credits or the non-ECA Covered Part of a Syndicated Loan
The price indicated by private banks/institutions with respect to the uncovered tranche of the export credit
in question (or sometimes as the non-ECA covered part of a syndicated loan) may represent the best match
to ECA cover. Pricing on such un-covered portions or non-covered parts should only be used if provided
on commercial terms (e.g. this would exclude IFI funded portions).

Name-Specific Corporate Bonds
Corporate bonds reflect name specific credit risk. Care should be used in matching in terms of the ECA
contract characteristics, such as term of maturity, and currency denomination, and any credit
enhancements. If primary corporate bonds (i.e. all-in yield upon issuance) or secondary corporate bonds(i.e. the option adjusted spread over the appropriate curve, which is usually the relevant currency swap
curve) are used, those for the obligor should be used in the first instance; if not available, primary or
secondary corporate bonds from Related Entities may be used.

Name-Specific Credit Default Swaps
Credit Default Swaps (CDS) are a form of protection against default. The CDS spread is the amount paid
per period by the buyer of the CDS as a percentage of notional principal, and is usually expressed in basis
points. The CDS buyer effectively buys insurance against default by making payments to the seller of the
CDS for the life of the swap, or until the credit event occurs. A CDS curve for the obligor should be usedin the first instance; if not available, CDs curves from Related Entities may be used.

Loan Benchmarks
Primary loan benchmarks (i.e. pricing upon issuance) or secondary loan benchmarks (i.e. the current yieldon the loan expected by the financial institution purchasing the loan from another financial institution).
All fees must be known for primary loan benchmarks so that the all-in yield can be calculated. If loan
benchmarks are used, those for the obligor should be used in the first instance; if not available, those fromsimilar entities may be used.

Benchmark Market Curves
Benchmark market curves reflect the credit risk of a whole sector or class of buyers. This market
information may be relevant when name specific information is not available. In general, the quality of
the information inherent to these markets depends upon their liquidity. In any case, one should look formarket instruments that provide the closest match in terms of the ECA contract characteristics, such asdate, credit rating, term of maturity, and currency denomination.

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ANNEX VIII: CRITERIA AND CONDITIONS GOVERNING THE
APPLICATION OF A THIRD-PARTY REPAYMENT GUARANTEE AND
THE CRITERIA FOR ASSESSING MULTILATERAL OR
REGIONAL INSTITUTIONSPURPOSEThis Annex provides the criteria and conditions that govern the application of third-party repayment
guarantees according to Article 21 e) of the Arrangement. It also provides the criteria by which
multilateral or regional institutions should be assessed when determining if an institution should be subject
to the premium rules for Market Benchmark Transactions in Article 21 c) of the Arrangement.

APPLICATION
Case 1: Guarantee for the Total Amount at Risk
When security in the form of a repayment guarantee from an entity is provided for the total amount at risk
(i.e. principal and interest), the applicable Country Risk Classification and Buyer Risk Category may bethat of the guarantor when the following criteria are met:‒

The guarantee covers the entire duration of the credit.

‒

The guarantee is irrevocable, unconditional and available on-demand.

‒

The guarantee is legally valid and capable of being enforced in the guarantor country's
jurisdiction.

‒

The guarantor is creditworthy in relation to the size of the guaranteed debt.

‒

The guarantor is subject to the monetary control and transfer regulations of the country in which
it is located, except when the guarantor is a multilateral institution that the Participants haveagreed is generally exempt from such controls and limitations.

If the guarantor is a subsidiary/parent of the guaranteed entity, Participants shall, on a case-by-case basis,
determine whether: (1) in consideration of the relationship between the subsidiary/parent and the degreeof legal commitment of the parent, the subsidiary/parent is legally and financially independent and could
fulfil its payment obligations; (2) the subsidiary/parent could be affected by local events/regulations orsovereign intervention; and (3) the Head Office would in the event of a default regard itself as being liable.
Case 2: Guarantee Limited in Amount
When security in the form of a repayment guarantee from an entity is provided for a limited amount at
risk (i.e. principal and interest), the applicable Country Risk Classification and Buyer Risk Category may
be that of the guarantor for the portion of the credit subject to the guarantee, providing that all otherrelevant criteria listed under Case 1 are met.
For the unguaranteed portion, the applicable Country Risk Classification and Buyer Risk Category is thatof the obligor.

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Criteria for the Assessment of Multilateral or Regional Institutions
The Participants may agree that a multilateral or regional institution is subject to the premium rules forMarket Benchmark Transaction in Article 21 c) if the institution is generally exempt from the monetarycontrol and transfer regulations of the country in which it is located. Such institutions shall be assessedon a case-by-case basis on their own merits and in consideration of whether:‒

the institution has statutory and financial independence;‒

all of the institution's assets are immune from nationalisation or confiscation;‒

the institution has full freedom of transfer and conversion of funds;‒

the institution is not subject to government intervention in the country where it is located;‒

the institution has tax immunity; and‒there is an obligation of all its Member countries to supply additional capital to meet theinstitution's obligations.

The assessment should also take into consideration the historical payment record in situations of country
credit risks default either in the country where it is located or in an obligor’s country, and any other factorsthat may be deemed appropriate in the assessment process.
The list of such multilateral and regional institutions is not closed and a Participant may nominate an
institution for review according to the above-listed considerations. The list of multilateral and regional
institutions that are subject to the premium rules for Market Benchmark Transaction in Article 21 c) shallbe made public by the Participants.

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ANNEX IX: BUYER RISK CATEGORIES QUALITATIVEDESCRIPTIONS

Better than Sovereign (SOV+)This is an exceptional classification. The entity achieving such a classification is one with an exceptionallystrong credit profile that could be expected to fulfil its payment obligations during a period of sovereign
debt distress or even default. International Credit Rating Agencies issue regular reports listing Corporate
and Counterparty Ratings that exceed the Sovereign's Foreign Currency Rating. Except when the risksovereign has been identified through the Sovereign Risk Assessment Methodology as being significantly
higher than country risk, Participants proposing that an entity be classified as better than sovereign shallreference such better than sovereign ratings in support of their recommendation. In order to be classified
as better than its host sovereign, an entity would be expected to display several or normally a majority of
the following characteristics or equivalents:•

a strong credit profile;•

substantial foreign exchange earnings relative to its currency debt burden;•

production facilities and cash generation ability from subsidiaries or operations offshore,
especially those domiciled in highly rated sovereigns, i.e. multinational enterprises;•

a foreign owner or a strategic partner which could be relied on as a source of financial support
in the absence of a formal guarantee;•

a history of preferential treatment of the entity by the sovereign, including exemption fromtransfer and convertibility constraints and surrender requirements for export proceeds, andfavourable tax treatment;•

committed credit lines from highly rated international banks, especially credit lines without amaterial adverse change (MAC) clause which enable banks to withdraw committed facilities
in the event of a sovereign crisis or other risk events; and•assets held offshore, especially liquid assets, often as a result of rules allowing exporters to
trap and maintain cash balances offshore that are available for debt service.

Normally the SOV+ buyer risk category is not applicable to:•publicly-owned entities and utilities, sub-sovereigns as line ministries, regional governments,
etc;•

financial institutions domiciled in the sovereign’s jurisdiction; and•entities primarily selling to the domestic market in local currency.

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Sovereign (SOV)
Sovereign obligors/guarantors are entities that are explicitly legally mandated to enter into a debt payment
obligation on the behalf of the Sovereign State, typically Ministry of Finance or Central bank1. A risk
designated as sovereign is one where:•

the obligor/guarantor is legally mandated to enter into a debt payment obligation on behalf of
the Sovereign and thereby commits the full faith and credit of the sovereign; and•in the event of rescheduling of sovereign risk, the debt in question would be included in therescheduling and payment obligations acquired by the sovereign by virtue of the rescheduling.

Equivalent to the Sovereign (CC0): Exceptionally Good Credit Quality
The “equivalent to sovereign” category embraces two basic types of obligors/guarantors:•

Public entities where due diligence reveals that either the buyer has the implicit full faith andcredit/support of the sovereign or that the likelihood of sovereign liquidity and solvency
support is very high, both in relation to recovery prospects as well as default risk.
Non-sovereign public entities equivalent to the sovereign would also include companies
owned by the government with a monopoly or near monopoly on operations in a sector(e.g. power, oil, gas).

•

Corporate entities with an exceptionally strong credit profile, displaying features in terms ofboth default and recovery prospects, which indicate that the risk could be seen as being
equivalent to sovereign. Candidates could include strong blue chip corporates or very
important banks for which the likelihood of sovereign liquidity and solvency support is high.

Exceptionally good credit quality implies that the risk of payment interruption is expected to be negligible
and that the entity has an exceptionally strong capacity for repayment and this capacity is not likely to beaffected by foreseeable events. The credit quality is typically manifested in a combination of some, if notall, of the following characteristics of the entity’s business and financial profile:•

exceptionally good to very good cash and income generation•

exceptionally good to very good liquidity levels•

exceptionally low to very low leverage•

excellent to very strong business profile with proven and very strong management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is avery high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal
to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC0 would be rated between AAA (Country
Category 1) and B (Country Category 7) by accredited CRAs.

1

Most typically this would be a risk on the central bank or Ministry of Finance. For central government entities
other than the finance ministry, due diligence shall be undertaken to affirm that the entity commits the full faith andcredit of the sovereign.

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Very Good Credit Quality (CC1)
The risk of payment interruption is expected to be low or very low. The obligor/guarantor has a verystrong capacity for repayment and this capacity is not likely to be affected by foreseeable events. The
obligor/guarantor has a limited or very limited susceptibility to adverse effects of changes incircumstances and economic conditions. The credit quality is typically manifested in a combination ofsome, if not all, of the following characteristics of the business and financial profile:•

very good to good cash and income generation•

very good to good liquidity levels•

very low to low leverage•very strong business profile with proven management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is avery high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal
to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC1 would be rated between AAA (Country
Category 1) and B (Country Category 7) by accredited CRAs.

Good to Moderately Good Credit Quality, Above Average (CC2)
The risk of payment interruption is expected to be low. The obligor/guarantor has a good to moderately
good capacity for repayment and this capacity is not likely to be affected by foreseeable events. The
obligor/guarantor has a limited susceptibility to adverse effects of changes in circumstances and economic
conditions. The credit quality is typically manifested in a combination of some, if not all, of the following
characteristics of the business and financial profile:•

good to moderately good cash and income generation•

good to moderately good liquidity levels•

low to moderately low leverage•moderately strong business profile with proven management abilities

The entity is also characterised by a high quality of financial and ownership disclosure, unless there is avery high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal
to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC2 would be rated between A+ (Country
Category 1) and B- or worse (Country Category 7) by accredited CRAs.

Moderate Credit Quality, Average (CC3)
The risk of payment interruption is expected to be moderate or moderately low. The obligor/guarantor hasa moderate or moderately good capacity for repayment. There is a possibility of credit risk developing as
the obligor/guarantor faces major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely payments. However,business or financial alternatives may be available to allow financial commitments to be met. The credit
quality is typically manifested in a combination of some, if not all, of the following characteristics of thebusiness and financial profile.

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TAD/PG(2023)7  125•

moderately good to moderate cash and income generation•

moderately good to moderate liquidity levels•

moderately low to moderate leverage•moderate business profile with proven management abilities

The entity is also characterised by an adequate quality of financial and ownership disclosure, unless there
is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that isequal to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC3 would be rated between BBB+ (Country
Category 1) and B- or worse (Country Category 6) by accredited CRAs.

Moderately Weak Credit Quality, Below Average (CC4)
The risk of payment interruption is expected to be moderately weak. The obligor/guarantor has a moderate
to moderately weak capacity for repayment. There is a possibility of credit risk developing as theobligor/guarantor faces major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet timely payments. However,business or financial alternatives may be available to allow financial commitments to be met. The credit
quality is typically manifested in a combination of some, if not all, of the following characteristics of thebusiness and financial profile:•moderate to moderately weak cash and income generation•

moderate to moderately weak liquidity levels•

moderate to moderately high leverage•moderately weak business profile with limited track record of management abilities

The entity is also characterised by an adequate quality of financial and ownership disclosure, unless there
is a very high likelihood of support from a parent (or sovereign) with a buyer risk classification that isequal to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC4 would be rated between BB+ (Country
Category 1) and B- or worse (Country Category 5) by accredited CRAs.

Weak Credit Quality (CC5)
The risk of payment interruption is expected to be high to very high. The obligor/guarantor has amoderately weak to weak capacity for repayment. The obligor/guarantor currently has the capacity tomeet repayments but a limited margin of safety remains. However, there is a likelihood of developing
payment problems as the capacity for continued payment is contingent upon a sustained, favourable
business and economic environment. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to repay. The credit quality is typically manifested in a combination ofsome, if not all, of the following characteristics of the business and financial profile:•moderately weak to weak to very weak cash and income generation•

moderately weak to weak liquidity levels•

moderately high to high leverage•

weak business profile with limited or no track record of management abilities

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126  TAD/PG(2023)7
The entity is also characterised by a poor quality of financial and ownership disclosure, unless there is avery high likelihood of support from a parent (or sovereign) with a buyer risk classification that is equal
to or better than what corresponds to this buyer risk category.
Depending on the classification of the country in which the obligor/guarantor is domiciled, it is likely thatan obligor/guarantor classified in buyer risk category CC5 would be rated between BB- (Country
Category 1) and B- or worse (Country Category 4) by accredited CRAs.

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ANNEX X: CRITERIA AND CONDITIONS GOVERNING THE
APPLICATION OF COUNTRY RISK MITIGATION TECHNIQUES AND
BUYER RISK CREDIT ENHANCEMENTSPURPOSEThis Annex provides detail on the use of country risk mitigation techniques listed in Article 26 a) of the
Arrangement and the buyer risk credit enhancements listed in Article 27 a) of the Arrangement; thisincludes the criteria, conditions and specific circumstances which apply to their use as well as the impact
on the MPRs.

COUNTRY RISK MITIGATION TECHNIQUES
1.

Offshore Future Flow Structure Combined with Offshore Escrow AccountDefinition:
A written document, such as a deed or a release or trustee arrangement, sealed and delivered to a third
party, i.e. a person not party to the instrument, to be held by such third party until the fulfilment of certain
conditions and then to be delivered by it to the other party to take effect. If the following criteria aresatisfied subject to consideration of the additional factors listed, this technique can reduce or eliminate
the transfer risks, mainly in the higher risk country categories.

Criteria:‒

The escrow account is related to a foreign exchange-earning project and the flows into theescrow account are generated by the project itself and/or by other offshore export receivables.

‒

The escrow account is held offshore, i.e. located outside of the country of the project where
there are very limited, transfer or other country risks (i.e. in a High Income OECD country
or High Income Euro Area country).

‒

The escrow account is located in a first class bank, which is not directly or indirectly
controlled by interests of the obligor or by the country of the obligor.

‒

The funding of the account is secured through long-term or other appropriate contracts.

‒

The combination of the sources of revenues (i.e. generated by the project itself and/or theother sources) of the obligor flowing through the account are in hard currency and canreasonably be expected to be collectively sufficient for the service of the debt for the entire
duration of the credit, and come from one or more creditworthy foreign customers located inbetter risk countries than the country in which the project is located (i.e. normally High
Income OECD Countries or High Income Euro Area Countries).

‒

The obligor irrevocably instructs the foreign customers to pay directly into the account(i.e. the payments are not forwarded through an account controlled by the obligor or throughits country).

‒

The funds which have to be kept within the account are equal to at least six months of debt
service. Where flexible repayment terms are being applied under a project finance structure,

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128  TAD/PG(2023)7
an amount equivalent to the actual six months debt service under such flexible terms are to
be kept within the account; this amount may vary over time depending on the debt service
profile.
‒The obligor has restricted access to the account (i.e. only after payment of the debt service
under the credit).

‒

The revenues deposited in the account are assigned to the lender as direct beneficiary, for theentire life of the credit.

‒

The opening of the account has received all the necessary legal authorisations from the local
and any other appropriate authorities.

‒

The escrow account and contractual arrangements may not be conditional and/or revocable
and/or limited in duration.

Additional factors to be taken into consideration:
The technique applies subject to a case-by-case consideration of the above characteristics and, inter alia,
with regard to:‒the country, the obligor (i.e. either public or private), the sector, the vulnerability in relation
to the commodities or services involved, including their availability for the entire durationof the credit, the customers;‒

the legal structures, e.g. whether the mechanism is sufficiently immune against the influenceof the obligor or its country;‒

the degree to which the technique remains subject to government interference, renewal orwithdrawal;‒

whether the account would be sufficiently protected against project related risks;‒

the amount which will flow into the account and the mechanism for the continuation of
appropriate provision;‒

the situation with regard to the Paris Club (e.g. possible exemption);‒the possible impact of country risks other than the transfer risk;‒

the protection against the risks of the country where the account is located;‒the contracts with the customers, including their nature and duration; and‒the global amount of the expected foreign earnings in relation to the total amount of thecredit.

Impact on the MPR
The application of this country risk mitigation technique may result in a one category improvement in theapplicable country risk classification for the transaction, except for transactions in Country Risk
Category 1.

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2.

Local Currency Financing

Definition:
Contract and financing negotiated in convertible and available local, other than hard, currencies andfinanced locally that eliminates or mitigates the transfer risk. The primary debt obligation in local currency
would, in principle, not be affected by the occurrence of the first two country credit risks.

Criteria:‒

The ECA liability and claims payment or the payment to the Direct Lender are expressed/
made throughout in local currency.

‒

The ECA is normally not exposed to the transfer risk.

‒

In the normal course of events, there will be no requirement for local currency deposits to beconverted into hard currency.

‒

The borrower’s repayment in its own currency and in its own country is a valid discharge ofthe loan obligation.

‒

If a borrower’s income is in local currency the borrower is protected against adverse
exchange rate movements.

‒

Transfer regulations in the borrower’s country should not affect the borrower’s repayment
obligations, which would remain in local currency.

Additional factors to be taken into consideration:
The technique applies on a selective basis in respect of convertible and transferable currencies, where theunderlying economy is sound. The Participant ECA should be in a position to meet its obligations to pay
claims expressed in its own currency in the event that the local currency becomes either ‘non-transferable’or ‘non-convertible’ after the ECA takes on liability. (A Direct Lender would however carry thisexposure.)

Impact on the MPR
The application of this risk mitigation technique may result in a discount of no more than 20% to thecountry credit risk portion of the MPR (i.e. a local currency factor [LCF] with a value of no more than
0.2).

BUYER RISK CREDIT ENHANCEMENTS
The following table provides definitions of the buyer risk credit enhancements that may be applied, alongwith their maximum impact on the applicable MPRs. For transactions subject to country risk category 1-7
MPRs, the maximum CEF used in the MPR formula is stipulated; for market benchmark transactions, themaximum discount to the applicable Market Benchmark MPR is stipulated1.

1

For a Market Benchmark Transaction, the premium rate resulting from the application of buyer risk credit
enhancements may not be lower than the applicable Minimum Actuarial Premium.

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CREDIT
ENHANCEMENTAssignment ofContract
Proceeds orReceivables

DEFINITIONIn the event a borrower has contracts with strong off-takers, whether offshoreor local, a legally enforceable assignment of the contract provides rights toenforce the borrower’s contracts and/or make decisions under major contracts
in the place of the borrower after a default under the loan. A direct agreementwith a third party in a transaction (a local government agency in a mining or
energy transaction) allows Lenders to approach a government to seek
remedies for expropriation or other violation of contractual obligations related
to the transaction.

MAXIMUM CEF(COUNTRY RISKCATEGORY 1-7)

MAXIMUM
DISCOUNT(MARKETBENCHMARK)

0.10

N/A

0.25

15%

An existing company operating in a difficult market or sector may havereceivables related to the sale of production with a company or companies
located in a more stable environment. Receivables would generally be in a hardcurrency but may not be the subject of a specific contractual relationship.
Assignment of these receivables could provide asset security in the accountsof the Borrower, giving the Lender a preferential treatment in the cash flow
generated by the Borrower.
Asset-Based
Security

Control of an asset shown by:(1) mortgage on very mobile and valuable piece of property and(2) property that has entire value in itself.
An asset-based security is one that can be reacquired with relative ease suchas a locomotive, medical equipment or construction equipment. In valuing sucha security, the ECA should take into consideration the legal ease of recovery.
In other words, there is more value when the security interest in the asset isperfected under an established legal regime and less value where the legal
ability to recover the asset is questionable. The precise value of an asset-based
security is set by the market, with the relevant "market" being deeper than alocal market because the asset can be moved to another jurisdiction. NOTE:
The application of an asset-based security credit enhancement for transactions
subject to country risk category 1-7 MPRs applies to the buyer risk, where theasset-based security is held internally within the country in which thetransaction is domiciled.

Fixed Asset
Security

A fixed asset security is most typically component equipment which may beconstrained by its physicality such as turbine or manufacturing machinery
integrated into an assembly line. The intent and value of the fixed asset security
is to provide the ECA with more leverage over the use of the asset in recouping
losses in the event of default. The value of a fixed asset security varies
dependent on economic, legal, market and other factors.

0.15

10%

Escrow
Account

Escrow accounts involve debt service reserve accounts held as security for thelenders or other forms of cash receivable accounts held as security for thelenders by a party not controlled or sharing common ownership with thebuyer/obligor. The escrowed amount must be deposited or escrowed inadvance. The value of such security is nearly always 100% of the nominal
amount in such cash accounts. Permits greater control over use of cash,
ensures that debt is serviced before discretionary spending. NOTE: The
application of an escrow account credit enhancement for transactions subject
to country risk category 1-7 MPRs applies to the buyer risk, where the escrowaccount is held internally within the country in which the transaction is
domiciled. Cash security significantly diminishes the risk of default for thecovered instalments.

escrowedamount as % ofcredit up to a
maximum of
0.10

escrowedamount as % ofcredit up to a
maximum of
10%

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ANNEX XI: CHECKLIST OF DEVELOPMENTAL QUALITYCHECKLIST OF DEVELOPMENTAL QUALITY OF AID FINANCED PROJECTS
A number of criteria have been developed in recent years by the DAC to ensure that projects in developing
countries that are financed totally or in part by Official Development Assistance (ODA) contribute todevelopment. They are essentially contained in the:•DAC Principles for Project Appraisal, 1988;•

DAC Guiding Principles for Associated Financing and Tied and Partially Untied Official
Development Assistance, 1987; and•Good Procurement Practices for Official Development Assistance, 1986. Of these, the DAC
Principles for Project Appraisal and the Good Procurement Practices for Official Development
Assistance were, together with several other ‘principles’ or ‘good practices’ the DAC
produced, published together in the Development Assistance Manual, DAC Principles for
Effective Aid (DAM) in 1992.

CONSISTENCY OF THE PROJECT WITH THE RECIPIENT COUNTRY'SOVERALL INVESTMENT PRIORITIES (PROJECT SELECTION)
Is the project part of investment and public expenditure programmes already approved by the central
financial and planning authorities of the recipient country?
(Specify policy document mentioning the project, e.g. public investment programme of the recipient
country.)
Is the project being co-financed with an international development finance institution?
Does evidence exist that the project has been considered and rejected by an international development
finance institution or another DAC Member on grounds of low developmental priority?
In the case of a private sector project, has it been approved by the government of the recipient country?
Is the project covered by an intergovernmental agreement providing for a broader range of aid activities
by the donor in the recipient country?

PROJECT PREPARATION AND APPRAISAL
Has the project been prepared, designed and appraised against a set of standards and criteria broadly
consistent with the DAC Principles for Project Appraisal from paragraphs 91-162 of the DAM? Relevant
principles concern project appraisal under:a) Economic aspects (paragraphs 120 to 128 DAM).
b) Technical aspects (paragraph 112 DAM).
c) Financial aspects (paragraphs 113 to 119 DAM).
In the case of a revenue producing project, particularly if it is producing for a competitive market, has theconcessionary element of the aid financing been passed on to the end-user of the funds? (paragraph 115
DAM).
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132  TAD/PG(2023)7a) Institutional assessment (paragraphs 130 to 134 DAM).
b) Social and distributional analysis (paragraphs 137 to 147 DAM).
c) Environmental assessment (paragraphs 145 to 147 DAM).

PROCUREMENT PROCEDURES
What procurement mode will be used among the following? (For definitions, see Principles listed in Good
Procurement Practices for ODA from paragraphs 409-429 of the DAM).
a) International competitive bidding (paragraphs 411 and 419-429 DAM: Minimum conditions for
effective international competitive bidding).
b) National competitive bidding (paragraph 412 DAM).
c) Informal competition or direct negotiations (paragraphs 413-414 DAM).
Is it envisaged to check price and quality of supplies (paragraph 153 DAM)?

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ANNEX XII: COMMERCIAL INTEREST REFERENCE RATE (CIRR)PROVISIONSSECTION 1: CONSTRUCTION OF THE CIRR
1.
A CIRR shall be established for each Participant’s currency, provided that the required data is
made available to the Secretariat. A Participant or a non-Participant may request that a CIRR beestablished for the currency of a non-Participant. In consultation with the interested non-Participant, aParticipant or the Secretariat on behalf of that non-Participant may make a proposal for the constructionof the CIRR in that currency.
2.
Other Participants shall use the CIRR set for a particular currency should they decide to financein that currency.
3.

The CIRR is composed of a base rate and a margin.

4.

The minimum CIRR for any currency shall be no lower than 15 basis points.

ESTABLISHMENT OF THE BASE RATE
5.

CIRR rates shall be calculated monthly and will take effect on the 15th day of each month.

6.

CIRR base rates are computed using government bond yields.

7.
The maturity of the government bond to be used for each transaction shall be determinedaccording to the following formula: Drawdown Period + 0.5 Repayment Period + 0.5 Repayment
Frequency in years1 (for standard repayment profiles). For transactions with a non-standard repayment
profile, the following formula shall be applied: DP + [∑𝑛𝑖=1(𝑡𝑙𝑖 − 𝑡𝑠𝑝 ) ∗ 𝐷𝑙𝑖 ] / ∑𝑛𝑖=1 𝐷𝑙𝑖 ∗ 1/365]2. The
result will be rounded to the nearest year, capped at ten years and floored at three years.
8.
Participants shall compute the bond yields using the arithmetic mean of all the daily yields ofthe 3, 4, 5, 6, 7, 8, 9 and 10-year government bonds of the previous calendar month for their respective
currencies. Those yields shall be reported to the Secretariat no later than five days after the end of eachmonth and shall be made publicly available on a monthly basis.
9.
Participants may use linear interpolation in order to achieve the necessary yields as long as it iswithin the interpolation region of 2-year government bonds up to and including 15-year government
bonds. Extrapolation to a lower or higher bond yield shall not be allowed.
10.
In the event where the data for one or more of the necessary government bonds could not be
obtained (according to Articles 8 and 9), there will be no CIRR in that currency for transactions requiringsuch maturities (Article 7 refers) unless the missing data concerns shorter maturities and data for higher
maturities (up to 10 years) has been provided. In such event, the yields of the nearest higher government
bond shall be used to compute the base rates requiring such shorter maturities.
1

Repayment Frequency for annual repayment = 1, for semi-annual repayments = 0.5 and for quarterly
repayments = 0.25.
2

tli = date of the ist installment; tsp = date of the starting point ; Dli = amount paid at the ist installment.

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ESTABLISHMENT OF THE MARGIN3
11.
The margin shall be calculated on a quarterly basis (respectively on 15 January, 15 April,
15 July and 15 October of each year) according to the five-year swap spread yields (difference between
the five-year government bond rate and the five-year swap rate).
12.
The margin shall be computed using the following formula: 0.5 * (three-month average of daily
five-year swap spread yields) + 80 basis points. The result shall be rounded to the nearest basis point andcapped at a maximum of 120 basis points and floored at a minimum of 80 basis points.
13.
The three-month average of the daily five-year swap spreads to be used shall be obtained by
calculating the arithmetic mean of the daily five-year swap spread of the last three calendar months in therelevant currencies. They shall be reported to the Secretariat no later than five days after the end of eachquarter.
14.
In the event where the five-year swap spread is not available in the market for a given currency,
the margin shall be set at 100 bps.
15.

The resulting margins shall be made publicly available at the beginning of each quarter.

SECTION 2: APPLICATION OF THE CIRR
16.
Where official financing support is provided for floating rate loans, banks and other financing
institutions shall not be allowed to offer the option of the lower of either the CIRR (at time of the originalcontract) or the short-term market rate throughout the life of the loan.

VALIDITY PERIOD OF CIRR
17.

A CIRR may be locked in before, at, or after the Date of Financial Contract (DFC).

18.
In the case where a CIRR is locked in and held prior to DFC, the Holding Period shall not exceed
12 consecutive months4, the length of the Holding Period shall be decided at the latest at the Date of Quote(DoQ), and an additional spread shall be added to the applicable CIRR according to the table below:
Holding Period(in months)

Cost of Holding Period(basis points)

1-6
7
8
9
10
11
12

20
23
26
30
34
39
44

3

Following the discontinuation of Libor, Participants agreed on 30 December 2022 to implement a
temporary margin of 100 basis points for all currencies for one year as of the implementation of the new CIRR rules(i.e., until 14 July 2024) or until Participants can agree to an alternative.
4

If there is a reset of the CIRR, it resets the countdown for the number of months back to zero.

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19.
If the Holding Period lapses prior to the DFC, the CIRR rate may be reset immediately or at alater time and held for a new Holding Period. If the signature of the commercial contract (SCC) has
occurred prior to the reset, the reset rate shall not be lower than the latest previously locked-in rate. Thereis no limit to the number of times a CIRR may be reset.
20.
Any change in the Interest Accrual Period prior to or at DFC shall trigger a recalculation of the
CIRR base rate. Such recalculation shall be based on the new Interest Accrual Period using the base rates
in effect at the initial DoQ; it shall not be considered as a reset or a cancellation of the CIRR rate.

COMMITMENT FEE
21.
A commitment fee shall be charged for direct credits. If the CIRR was locked in prior to or at
DFC, the commitment fee shall be charged immediately following DFC. If the CIRR was locked in after
DFC, then it shall be charged immediately following DoQ.
22.
Participants shall charge a commitment fee at or above commercial market practices provided
that such information is available.

VOLUNTARY CANCELLATION AND VOLUNTARY PREPAYMENT
23.
If a CIRR rate is voluntarily cancelled, any subsequent CIRR rate that is quoted for the sametransaction and the same exporter shall be no lower than the latest previously quoted CIRR.
24.

Prior to DFC, there is no cost for cancelling a CIRR rate or switching to a floating rate.

25.
Once the DFC has occurred and irrespective of when the CIRR was set, in the event of voluntarycancellation or voluntary prepayment of a loan or any portion thereof, the borrower shall compensate thegovernment institution providing official support for all costs and losses incurred as a result of such early
prepayment or voluntary cancellation. This includes the costs to the government institution of replacing
the part of the expected fixed rate cash inflow interrupted by the early prepayment or voluntarycancellation.

SECTION 3: TRANSITIONAL AGREEMENTS
26.
The provisions set out in this Annex shall come into force on 15 July 2023 for transactionscommitted from that date onwards.

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136  TAD/PG(2023)7

ANNEX XIII: LIST OF DEFINITIONS

For the purpose of the Arrangement:a)Commitment: any statement, in whatever form, whereby the willingness or intention toprovide official support is communicated to the recipient country, the buyer, the borrower, theexporter or the financial institution.

b)Common Line: an understanding between the Participants to agree, for a given transaction orin special circumstances, on specific financial terms and conditions for official support. The
rules of an agreed Common Line supersede the rules of the Arrangement only for thetransaction or in the circumstances specified in the Common Line.

c)

Concessionality Level of Tied Aid: in the case of grants the concessionality level is 100%.
In the case of loans, the concessionality level is the difference between the nominal value ofthe loan and the discounted present value of the future debt service payments to be made by
the borrower. This difference is expressed as a percentage of the nominal value of the loan.

d)Date of Financial Contract (DFC): the date at which all parties to the Financial Contract arebound, taking into account any entailing legal obligations.

e)Date of Quote (DoQ): the date at which a CIRR is locked-in.

f)Decommissioning: closing down or dismantling of a nuclear power plant.

g)

Export Contract Value: the total amount to be paid by or on behalf of the purchaser for goods
and/or services exported, i.e. excluding local costs as defined hereafter; in the case of a lease,
it excludes the portion of the lease payment that is equivalent to interest.

h)Final Commitment: for an export credit transaction (either in the form of a single transaction
or a line of credit), a final commitment exists when the Participant commits to precise andcomplete financial terms and conditions, either through a reciprocal agreement or by aunilateral act.

i)

Holding Period: the period starting at DoQ and ending at DFC.

j)

Initial Fuel Load: the initial fuel load shall consist of no more than the initially installed
nuclear core plus two subsequent reloads, together consisting of up to two-thirds of a nuclear
core.

k)

Interest Accrual Period: the period during which interest accrues (i.e., from first
disbursement until the last repayment of principal: drawdown period + repayment period).

l)Interest Rate Support: an arrangement between a government and banks or other financial
institutions which allows the provision of fixed rate export finance at or above the CIRR.

m) Line of Credit: a framework, in whatever form, for export credits that covers a series oftransactions which may or may not be linked to a specific project.
n)Local Costs: expenditure for goods and services in the buyer's country that are necessary either
for executing the exporter's contract or for completing the project of which the exporter's
contract forms a part. These exclude commission payable to the exporter's agent in the buying
country.
ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS

Unclassified

TAD/PG(2023)7  137o)Market Benchmark Transaction: transaction involving ultimate obligors/guarantors in
Category 0 countries, High Income OECD countries and High Income Euro Area countries.

p)

Minimum Actuarial Premium: is the annualised average default rate (derived fromcumulative default rates published by the main Accredited CRAs) for a given rating and total
term (WAL of the whole transaction) adjusted by an assumed loss given default and a costs
loading factor as per agreed conventions by the Participants.

q)

Name Specific Bond or CDS: a Name Specific Bond or CDS is limited to those market
benchmark instruments that belong to the exact identical obligor/guarantor as in the transaction
being supported.

r)

Pure Cover: official support provided by or on behalf of a government by way of export credit
guarantee or insurance only, i.e. which does not benefit from official financing support.

s)Related Entity: Related Entity references are benchmark instruments of a related borrower
rather than the exact identical borrower in the supported transaction. In the case where theobligor has no quoted bonds or CDSs, and there exists within the obligor’s organisational
structure a parent, subsidiary or sister company with Name Specific Bonds or CDSs
outstanding in the market, then with regard to Article 21 c), those Name Specific Bonds or
CDSs may be used as if they had been issued by the obligor itself if:
1)

The parent, subsidiary, or sister company has the same issuer CRA rating as theobligor/guarantor; or

2)

All of the following criteria are met:i.

The Participant's internal rating of the obligor/guarantor corresponds with the CRA
rating of the related entity.

ii.

The obligor/guarantor is the main operating company of the parent/holding, being a
key and integral part of the group’s business.

iii. The CRA rating is based on the core business of the group.
iv. The obligor/guarantor provides a significant part of the group’s earnings by providing
either some of the group’s core products/services to core clients or it owns andoperates a major portion of the parent’s assets.
v.

The sale of the obligor/guarantor from the group is very hard to conceive, and thedisposal would significantly alter the overall shape of the group.

vi. A default of the obligor/guarantor would constitute a huge reputational risk to thegroup, damage its franchise and could threaten its viability.
vii. A high level of management and operational integration exists where capital andfunding is typically provided by the parent company or a finance subsidiary via
intercompany loans and where parent support is unquestioned.
t)

Repayment Term: the period beginning at the starting point of credit, as defined in thisAnnex, and ending on the contractual date of the final repayment of principal.

u)Starting Point of Credit:
1)

Parts or components (intermediate goods) including related services: in the case of parts
or components, the starting point of credit is not later than the actual date of acceptance ofthe goods or the weighted mean date of acceptance of the goods (including services, if
applicable) by the buyer or, for services, the date of the submission of the invoices to theclient or acceptance of services by the client.

2)

Quasi-capital goods, including related services - machinery or equipment, generally of

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138  TAD/PG(2023)7
relatively low unit value, intended to be used in an industrial process or for productive orcommercial use: in the case of quasi-capital goods, the starting point of credit is not later
than the actual date of acceptance of the goods or the weighted mean date of acceptance ofthe goods by the buyer or, if the exporter has responsibilities for commissioning, then thelatest starting point is at commissioning, or for services, the date of the submission of theinvoices to the client or acceptance of the service by the client. In the case of a contract forthe supply of services where the supplier has responsibility for commissioning, the latest
starting point is commissioning.
3)

4)

Capital goods and project services - machinery or equipment of high value intended to be
used in an industrial process or for productive or commercial use:−

In the case of a contract for the sale of capital goods consisting of individual items
usable in themselves, the latest starting point is the actual date when the buyer takes
physical possession of the goods, or the weighted mean date when the buyer takes
physical possession of the goods.

−

In the case of a contract for the sale of capital equipment for complete plant or factories
where the supplier has no responsibility for commissioning, the latest starting point isthe date at which the buyer is to take physical possession of the entire equipment(excluding spare parts) supplied under the contract.

−

If the exporter has responsibility for commissioning, the latest starting point is atcommissioning.

−

For services, the latest starting point of credit is the date of the submission of theinvoices to the client or acceptance of service by the client. In the case of a contract
for the supply of services where the supplier has responsibility for commissioning, thelatest starting point is commissioning.

Complete plants or factories – complete productive units of high value requiring the use ofcapital goods:−

In the case of a contract for the sale of capital equipment for complete plant or factories
where the supplier has no responsibility for commissioning, the latest starting point ofcredit is the date when the buyer takes physical possession of the entire equipment(excluding spare parts) supplied under the contract.

−

In case of construction contracts where the contractor has no responsibility forcommissioning, the latest starting point is the date when construction has been
completed.

−In the case of any contract where the supplier or contractor has a contractual
responsibility for commissioning, the latest starting point is the date when it hascompleted installation or construction and preliminary tests to ensure it is ready for
operation. This applies whether or not it is handed over to the buyer at that time inaccordance with the terms of the contract and irrespective of any continuingcommitment which the supplier or contractor may have, e.g. for guaranteeing its
effective functioning or training local personnel.

−

Where the contract involves the separate execution of individual parts of a project, thedate of the latest starting point is the date of the starting point for each separate part,or the mean date of those starting points, or, where the supplier has a contract, not for
the whole project but for an essential part of it, the starting point may be thatappropriate to the project as a whole.

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Unclassified

TAD/PG(2023)7  139−v)

For services, the latest starting point of credit is the date of the submission of theinvoices to the client or the acceptance of service by the client. In the case of a contract
for the supply of services where the supplier has responsibility for commissioning, thelatest starting point is commissioning.

Tied Aid: aid which is in effect (in law or in fact) tied to the procurement of goods and/or
services from the donor country and/or a restricted number of countries; it includes loans,grants or associated financing packages with a concessionality level greater than zero percent.
This definition applies whether the “tying” is by formal agreement or by any form of informal
understanding between the recipient and the donor country, or whether a package includes
components from the forms set out in Article 30 of the Arrangement that are not freely andfully available to finance procurement from the recipient country, substantially all otherdeveloping countries and from the Participants, or if it involves practices that the DAC or theParticipants consider equivalent to such tying.

w) Untied Aid: aid which includes loans or grants whose proceeds are fully and freely available
to finance procurement from any country.
x)

Weighted Average Life of the Repayment Period: the time that it takes to retire one-half ofthe principal of a credit. This is calculated as the sum of time (in years) between the starting
point of credit and each principal repayment weighted by the portion of principal repaid ateach repayment date.

ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS
Unclassified